April 24 (Bloomberg) -- The price of Iranian staple goods surged this week as international sanctions squeezing the government forced officials to end a program offering preferential exchange rates for some importers.
The cause of the increase was a decision by President Mahmoud Ahmadinejad’s government to halt allocations of U.S. dollars at the official, and preferential, rate of 12,260 rials to importers of staple goods, including meat, chicken, cooking oil, sugar and rice, Shargh newspaper said. Importers must now pay 25,000 rials a dollar, the report said. The greenback trades at about 36,000 rials on the streets of Tehran, the rate used by most ordinary Iranians.
The changes come less than two months before Iranians elect a new president to replace Ahmadinejad, who’s ineligible to run for a third consecutive term. The decision also reflects the Iranian government’s challenges as it battles stricter financial and energy sanctions over its nuclear program that have restricted its crude oil sales and access to foreign currencies.
While Iran has money “earned from exports on paper, actually accessing it, and using it to pay for imports or to support the currency is very difficult,” said Edward Bell, a Middle-East analyst at the Economist Intelligence Unit. “Iran can still technically be earning money but it can’t get the money into the country.”
The recent decision could be a symptom of Iran’s shortage of foreign currencies, at least domestically, Bell said in an interview today.
Ahmadinejad’s critics have seized on public concerns over quickening inflation to attack his government.
“The president is destroying the riches of the country,” lawmaker Ahmad Tavakoli said in parliament today, his voice rising to a shout. He said citizens were complaining to him and other lawmakers about the dire situation. Iranians “can’t tolerate these high prices anymore.”
With inflation surging and oil output at the lowest levels since the 1980s, the tensions have touched off unusual public quarrels among Iran’s elite, mostly featuring Ahmadinejad. Supreme Leader Ayatollah Ali Khamenei, the Islamic republic’s highest authority, has rebuked politicians for squabbles that weaken the country.
Meat prices have increased 60 percent, while cooking oil prices climbed 35 percent, Tavakoli said in the chamber today.
“The price of meat has increased overnight,” said Marjan, 45, a homemaker in eastern Tehran. She declined to give her surname for fear of reprisals.
The ministers of energy and economy were asked to appear for questioning by 30 members of parliament today. About 13 of them said they would press the ministers over the lack of currency for medicine and medical equipment.
Iran, which is in a decade-long standoff with the so-called P5+1 group of countries -- China, France, Germany, Russia, the U.K. and U.S. -- over its nuclear program, has spent an estimated $100 billion on it, according to a report published by the Carnegie Endowment for International Peace. The cost includes nuclear-infrastructure investments as well as missed oil revenue from sanctions.
Iran, with 75 million people and a $484 billion economy, has maintained that its program operates within treaty boundaries and is peaceful.
Candidates in the June 14 election won’t register until May, and must be screened for their qualifications and loyalty to the Islamic Republic.
Most recent Iranian elections have involved competition between conservative defenders of the Islamic republic’s record and politicians seeking change in some areas, such as a freer media, more social liberties or more engagement with the West. The last one in 2009 led to mass protests by opposition supporters alleging vote-rigging, which were violently suppressed.
Prices for other staple goods are also set to increase and inflation will quicken, Hamid Hosseini, a member of Iran’s Chamber of Commerce, Industries and Mines, wrote in Shargh today. The new rate also applies to imports of medicine, the Tehran-based Jomhouri Eslami newspaper said. Inflation in urban areas in the 12-months to end of March was 31.5 percent, according to Iran’s Statistical Center.
Iran could witness an acceleration of inflation and another sharp weakening of the rial, Bell said. The rial was trading at 16,900 to the dollar in January 2012.
Deputy Industry Minister Hassan Radmard said last month that the government was setting aside staple goods including meat, rice, sugar ahead of a possible further cut of subsidies, a plan that was first started in 2010.
Still, concern about rising prices was evident last night at the Shahrvand supermarket chain near the Argentine roundabout in Tehran, homemaker Fatemeh Jahani, 32, said in an interview.
“People were purchasing foodstuffs as if there were already shortages,” Jahani said.
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