“Economists in favor of market economy believe that none of the subsidies have led to a decrease in prices for the benefit of the people. Instead, they have resulted in large profits for middlemen, and therefore subsidies should be given to the general public in cash. Furthermore, the elimination of these subsidies, consolidating the income from them, and distributing it equally among the people has been proposed as a solution to the corruption that has taken place in the past. In this regard, we have sat down for a conversation with one of the supporters of cash subsidy policy. “Meysam Hashemkhani,” an economist and analyst in the field of policy-making and economic and investment advisor, defended the elimination of preferential currency three months ago, stating: “The elimination of the 4200-toman currency frees up new resources for the government, which can be used in new ways for the people. After the elimination of the government currency, 10 billion dollars will be freed up. If

In the past few months, the government announced that it intends to provide cash subsidies to the people by eliminating preferential currency. In your opinion, is this policy better than paying preferential currency or not?

I definitely think that cash payments to people are less corrupt and more effective than dollar subsidies or any kind of subsidized goods. If you look at different countries, you won’t find a reasonable country that has a dual exchange rate or more; except for Venezuela, Zimbabwe, and a few other countries, of which Iran is also a part. But during the four years that the dollar clearly had a dual exchange rate, this was one of the worst times to eliminate the preferred currency because it is a time when our foreign policy complexities are at their peak, the possibility of the JCPOA is at its lowest, and the international economic conditions are very tense and accompanied by shocks. Within society, people are under a lot of stress because it is not clear to them what is happening in the field of foreign policy. Some of the issues are also caused by events that have lowered the society’s psychological tolerance threshold; such as some economic programs, to implementing plans to restrict the internet, and other things that will

Some people believe that because the government has faced a decrease in income for various reasons, implementing this plan is aimed at reducing the budget deficit. Is this belief correct?

Before answering your question, let me mention one thing. Even if we have the best rules and regulations in society, it is necessary for the general public to understand and respect them. Currently, traffic laws are good and defensible, and people generally believe that they are fair and not discriminatory. As a result, people have enough solidarity with these laws. It may not be ideal to follow these laws, but there is enough solidarity to make it work well. The same applies to economic laws. If we have a law that many people question whether it is good or not, it will surely face many problems in implementation. As for your question, if people think that the government is only thinking about putting money in their own pockets, the government will face difficulties in implementing it.

It was right that at least six months before, a regular and consistent framework was presented and reached the ears and opinions of experts, business owners, and the general public. In addition, in the six months leading up to the stabilization of the dollar exchange rate, there should have been no other tension in society, including the ones I mentioned earlier. Now that this has not been done, at least an effort should be made to address the gaps in this plan. One of the most important gaps in this plan is the very question you are asking, which is also raised by the general public. They believe that the government is trying to pocket money in this chaos and is not really thinking about the public interest. Regardless of whether this opinion is correct or not, if this analysis exists in society – which it does – it definitely reduces people’s empathy with this policy. The counterpoint to this is that the government must present a financial report and clearly state where it has obtained new financial resources – whether directly

Another issue that exists regarding the implementation of this policy is the problems observed regarding the household identification system and the categorization method. According to government officials, only 9 out of 10 households have received these welfare aids. Shouldn’t a policy that is claimed to affect 9 out of 10 of society be implemented with more accurate information infrastructures?

There are many letters among the general public that have problems with classification, or it is said that it is not clear whether more than 70 million people have received the new cash subsidy of 300 or 400 thousand tomans or not. Many people feel based on their own evidence that the number of subsidy recipients is much less than 70 million. Many people also believe that there are flaws in the classification, which I cannot judge about its accuracy or inaccuracy. I myself understand that the classification is either correct or incorrect. Either we know exactly who is richer or poorer, or we don’t know. But if it is accurate, it seems logical to pay cash to all members of society and to tax the wealthy reasonably, which will be dozens of times the amount of the subsidy. If the classification is incorrect, then cash payments should be made to everyone. I believe that using classification for identifying tax evasion or similar policies is more useful than cash subsidies, which is a very small amount. If

What I think is very necessary in this matter is the transparent reporting of the performance of this policy by the government. If there is any ambiguity regarding the categorization among the people, it should be clearly stated in the report and this idea should not be fostered in the public’s minds that a smaller number of subsidies have been paid; similar to the notion that exists in the public’s minds that the government is only thinking about its own pockets.

Different governments claim that by paying cash subsidies since 1389, they have improved the Gini coefficient and income distribution. This claim has also been raised in the recent report of the Statistical Center of Iran. In your opinion as an economist, does paying cash subsidies lead to an improvement in income distribution?

I am a supporter of the cash payment structure for subsidies and universal basic income (UBI). I believe that this structure is fundamentally useful and effective, especially in Iran where many policies get stuck in the cycle of bureaucracy and corruption. It is a low-corruption and low-cost structure, meaning that every rial we decide to pay to the people actually goes to them, while in other policies, only half of the rial reaches the people, with the other half being spent on government bureaucracy. Overall, I see this structure as both useful and flexible, as it can be used to define other policies. For example, every subsidy recipient can act as a guarantor for another person’s loan, similar to government employees. This policy can significantly increase access to bank loans. In the current situation, in rural areas and poor suburbs or inner-city areas, there is no access to government employee guarantors, or government employees are not willing to guarantee loans for these individuals. Therefore, I believe this

In your opinion, what other actions can be taken to make the cash payment policy of subsidies more efficient?

In summary, first and foremost, any income generated directly or indirectly from the removal of preferential currency should be declared by the government and all income should be paid in cash to the people, even if the government is seeking financial resources for specific projects. The government can persuade the people to invest in these special projects by convincing them that they are beneficial for the development of the country and allowing them to use their cash subsidies to purchase investment securities and receive profits. Therefore, the government must make efforts to declare the details of its useful and effective projects and persuade the people to invest in them.

The second issue is that regardless, the government must address any doubts, whether true or false, about the number of people who have received subsidies and the number of those who have been removed; 70 million recipients of subsidies do not agree with the intuition of many people and this doubt must be resolved.

Thirdly, measures must be taken to reduce the price pressure caused by the removal of preferential currency. The increase in prices due to the removal of preferential currency has been accompanied by an increase in the prices of some food items around the world, due to Russia’s attack on Ukraine. To prevent this complexity from having a compounded effect on prices, import licenses for various food items must be issued; these food items include both those consumed directly and those used as animal feed. The import of these items must be quickly liberalized, as a large portion of these goods are monopolized by soy and oilseeds, as well as some highly monopolized intermediary goods, which are controlled by a small number of importers and cause a more severe shock to prices. This market must be made competitive, especially for items that are facing shortages in the world, and monopolies must be eliminated in order to lower prices.

Regarding the classification of wealth, as I mentioned before, this classification should be precise and consistent in order to provide subsidies to everyone, and the wealthy should pay dozens of times more taxes based on the same classification. If it is not correct to provide subsidies to all social classes, then the classification must be accurate and precise.

What is your opinion about the payment of subsidies in the form of cash handouts and its effects on the economy of Iran, which is currently being discussed by government officials?

It seems that the government is pursuing a broad price control policy for various goods; although it is not clear if this policy will ultimately be implemented or not. As far as I know, many infrastructures have been prepared for its implementation and continuous funds are being spent on it. My guess is that the implementation of this structure will face a high level of corruption, perhaps even more than the corruption caused by preferential currency payments. I believe that if the government wants to ensure that the money paid to the people is spent on a certain set of food and special goods, it is enough to create this restriction on people’s cards so that the cash subsidies can only be spent in grocery stores and people do not spend it on luxury goods. If the government wants to enter a complex price control structure, it will only lead to the inefficiency of this policy and will result in more corruption in the economic structure.

Thank you for the opportunity you have given us.