The Iranian government announced today a step that will lead to a 20%–30% increase in a range of basic products precisely as protests over the high cost of living continue in the streets.
At the same time, it is making a dramatic change in the subsidy mechanism: less “cheap dollar” for importers, more direct assistance to the public. How does it work? Instead of subsidizing the importer through a preferred exchange rate that the government claims created corruption, the government gives each family a monthly purchase credit (not cash) of 10 million rials (about 7 dollars) to buy a defined basket of 11 food products.
This is a reform that tries to break the cartel market around subsidized foreign currency. But in the short term, it almost certainly causes price increases, and the big question is whether the “coupon” will really compensate for this or just add more fuel to the protest.
What does this say about the mood in the Iranian government? The fact that the aid was deposited in advance for several months, that it is limited to products, and that meat and medicine were kept on a preferred track suggests that it understands how volatile the situation is and is trying to buy time and restrain a backlash.