Ahmadinejad in budget stand-off with parliament

The Iranian president wants to amend the budget passed by lawmakers, claiming the poor need more benefits, but some say the tactic is a dangerous manoeuvre intended to avoid the blame for a doomed reform plan.

Mahmoud Ahmadinejad has threatened to hold a referendum on the budget and to refuse to implement its provisions unless an additional $20 billion is shifted to offset slashed subsidies.

TEHRAN // Supporters of the president, Mahmoud Ahmadinejad, in parliament are pushing for an amendment to the budget law that passed the house three weeks ago, in an effort to double the amount of money the government has available to dispense to the poor as subsidies for energy and basic goods are eliminated over the next five years.

"An urgent bill to amend the budget law will be presented to the house," Mehdi Ansari, director general of the government office in the parliament, was quoted by the Fars News Agency as saying on Saturday. The president's backers said the government would not be able to carry out his economic reform agenda with just the US$20 billion (Dh73.4bn) that will come from scrapping 20 per cent of the $100bn in subsidies that are to be paid out in the first year of the reform programme.

The original version of the government's budget bill for the current year called for scrapping $40bn in the first year and to use that to pay people compensation for the resulting higher prices of fuel, food and basic services. But the parliament approved the budget bill only after reducing the subsidy cut for the first year to $20bn. "A chaotic situation will result if the parliament and government do not co-operate on subsidy reforms ... and the biggest pressure from the implementation of the plan [with the resources now allowed by parliament] will fall on the shoulders of the economically unprivileged sections of the society," the pro-government Kayhan newspaper said in an editorial yesterday.

A maximum of half the amount the government acquires from scrapping subsidies can be handed out as cash compensation. The rest of the money is to cover the government's extra expenses and to compensate industries and other sectors that will be affected by higher energy prices. With the current allowance, the amount of compensation paid to individuals will not exceed 130,000 rials (Dh48) per month, which the executive branch says will not be sufficient to help the poor and working classes - the main Ahmadinejad vote bloc - against inflation.

Since parliament's approval of the budget law in late March for the current fiscal year, which began on March 21, Mr Ahmadinejad has on several occasions threatened to withhold implementing the reforms and even called for holding a referendum on them. The president's refusal to execute what parliament has passed into law is seen by some as a political strategy to shift blame for his reform plan's inevitable failure.

"The president has realised that the reform plan is doomed to failure but he has been making promises of cash dispensation for over two years. In order not to alienate the people who voted for him he is trying to cast the blame on the parliament, which is not very likely to disgrace itself by backing off so easily," a political analyst in Tehran, who spoke on condition of anonymity, said. Government critics, both among conservatives and reformists, argue that if the government is allowed to acquire $40bn by cutting subsidies in just one year, inflation will rise drastically - as high as 60 per cent - which would deal a crushing blow to the very classes Mr Ahmadinejad seeks to champion.

Some critics claim that the government's plan is a move to find extra revenue to cover what is expected to be a gaping budget deficit rather than actually seeking to reform the subsidy-driven economy. "Why doesn't the government openly tell people that ? even with the gradual scrapping of subsidies it will not be able to cover the drastic increase of its expenditures ? without imposing even more hardship on people?" Ali Hagh, a former journalist, wrote on the conservative Khabaronline news portal, which is said to be affiliated with the parliamentry speaker, Ali Larijani.

If the president fails to implement the reform law soon, he could face impeachment. "The parliament can prevent those who want to circumvent the ... law by employing methods such as grilling and impeaching [the president]," the conservative parliamentarian Seyed Reza Akrami wrote on the same news portal last week. [e-mail]