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Tehran: Ali Daryani is embarrassed at the inflationary pain he is passing on to his customers.
"Sometimes we have to change the price stickers three times a day because of inflation," the 42-year-old Tehran grocer said.
Iran's President Mahmoud Ahmadinejad survived this month's parliamentary election without a big blow to his prestige, even if his core support base among a broad conservative camp shrank.
Now the president's opponents in the Islamic Republic, both from the reformist minority and the victorious conservatives, could force him to rein in populist spending policies seen as partly to blame for inflation hovering around 19 per cent.
Since Ahmadinejad swept to power in 2005 promising to spread Iran's oil wealth to the people, soaring world oil prices have swelled national revenues, but economists say colossal subsidies and presidential handouts have predictably fuelled inflation.
Ahmadinejad is basking in support from Iran's Supreme Leader Ayatollah Ali Khamenei for his tough nuclear stance, but his economic record may dent his chances of re-election next year. Iranians are cushioned by a vast array of costly subsidies, but runaway prices still hit the pockets of ordinary consumers.
"The prices of rice, meat, fruit and everything else have gone up," complained Baqer Gabai, a 54-year-old retired teacher, in Tehran's Mohseni Square. "The price of chicken has doubled in six months, but my income has not changed a bit."
Micro-attention
Former Central Bank governor Seyed Mohammad Hussain Adeli, who now heads a think-tank, said Ahmadinejad was aware of the danger and was already reverting to some more orthodox policies.
"He has helped the poor in some way with micro-attention," he said of the president's habit of touring the provinces, receiving petitions and trying to address problems directly.
Adeli said the Central Bank was now pursuing "very contractionary policies" to correct this.
Bank governor Tahmasb Mazaheri has proposed bank loan repayment rates, or "profit-sharing" rates, based on inflation plus a fee - a move analysts saw reversing a policy backed by Ahmadinejad that had sent rates below inflation.
Iran, the world's fourth-biggest crude producer, has raked in $70 billion in oil revenue in the past year, the government says. But much of the cash flows out in lavish subsidies on everything from fuel and transport to food and medicine.
"The system is buying loyalty to pursue its nuclear programme," economist Saeed Laylaz said.
Many of the subsidies are not targeted, which often means the rich benefit more than the poor because they consume more.
"Taking away subsidies is no easy matter," said Mohammad Ali Farzin, an Iranian economist who heads a United Nations Development Programme poverty reduction unit. "The scale of the problem is just so overwhelming that it will take time."
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