Iran scraps cash handouts for wealthiest to ease burden on economy

The move, which will free up about $3 million a month of government money, is the latest in Tehran’s efforts to juggle cash

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Iran has scrapped the country’s wealthiest citizens off a list of people receiving monthly cash handouts in a small step toward easing the burden on the budget and freeing up more government funds, an official said Wednesday.

The move, which will free up about $3 million a month of government money, is the latest in Tehran’s efforts to juggle cash and wean the nation off subsidies in an oil-dependent economy suffering from a steep drop in global oil prices.

But it will also likely be another test of public support for moderate President Hassan Rowhani as Tehran negotiates a conclusive deal with world powers over its controversial nuclear program. That deal, expected to be finalized by the end of June, is meant to ensure that Iran cannot make a nuclear weapon in return for the lifting of crippling economic sanctions imposed on Tehran.

Iran began handing out the monthly $15 in cash to all Iranians - a population now of about 80 million people - in 2010 as compensation for cuts in food and energy subsidies. The handouts were introduced by Rowhani’s predecessor, hard-line President Mahmoud Ahmadinejad, who was subsequently criticized for allocating more than 90 percent of the money generated by subsidy cuts to the program.

Labor and Social Welfare Minister Ali Rabiei was quoted Wednesday as saying that 200,000 wealthy Iranians - as well as Iranians living abroad - have been eliminated last week from the list of those getting the handouts.

It was a slow process, starting first in March with Iranians living abroad, he said.

“We began by eliminating first 30,000, then 50,000 and now 200,000 people,” he said. Those removed from the list were given the option of registering their complaints and submitting data as to why they should keep getting the $15 a month, he added.

Iranian media first caught wind of the measure last week, forcing Rabiei to confirm it. There have already been grumblings.

“A citizen who has a car worth over $50,000 objected to being eliminated from the list and believed that receiving the cash was his right,” Rabiei said.

Since taking office last year, Rowhani has made a priority for his cash-strapped government to reduce the budget deficit and allocate more money to development projects.

Last year, the government had doled out the $15 a month per person to 76 million Iranians after about 4 million Iranians voluntarily declined the handouts. And now the removal of 200,000 from the list is expected to free up some $3 million.

The measure is also a test-balloon as the government plans to remove 6 million Iranians from the list in the coming months, Iran's state TV reported.

What is considered wealthy is debatable in Iran - those possessing expensive foreign-made cars, owners of foreign exchange shops, bank managers, managers of private companies, physicians or specialists and lawyers are among those considered best off.

Authorities have said that a base for the handout cutoffs will be a salary of over $850 a month.

Lawmaker Mohammad Reza Pourebrahimi said the issue is sensitive and the government is “concerned about social and political consequences.”

“That’s why it is moving slowly and quietly” to scrap the handouts, he added.

A senior religious figure who backs the measure, Ayatollah Nasser Makarem Shirazi, said that Islam prohibits the wealthy from receiving cash handouts. “Eliminating the wealthy must be carried out. The government should not fear doing this,” he said.

Mansour Moazzami, Iran’s deputy oil minister, complained last week that the financial burden of paying the handouts is preventing the development of crucial oil and gas projects. He said the handouts amount to 35,000 billion riyals (about $1.2 billion) a month.

“There is a need to change this,” he said. “The Oil Ministry is currently facing a financial burden as a result of paying the cash handouts.”

Meanwhile, Supreme Leader Ayatollah Ali Khamenei, who has final say on all state matters, urged Iranians on Wednesday to stop using foreign-made products in order to support domestic production - allegedly another step in helping the battered economy.

“The key to solving (Iran’s) economic problems is... inside the country,” he said. “If pens and papers on the desks, to construction materials and anything else can be produced in the country, it should be forbidden and considered a taboo” to import such things.

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