Last week, Iranian officials stated that the government faced a monthly deficit of 10,000 billion rial (about $400 million at the official exchange rate) to pay direct cash handouts to Iranian citizens. It is a known fact that the Ahmadinejad government filled similar gaps by illegally using funds from the Oil Stabilization Fund and the National Development Fund, however, the new government has decided to choose one of the two legal routes that are available within legal provisions, i.e., either increasing fuel prices or reducing the number of recipients of cash handouts.

Comments by key officials in government and the Majles indicate that the latter route has more supporters. First, no one is prepared to be responsible for an inflationary price hike in the current inflationary environment and, second, there are better arguments for the reduction of the number of recipients. 

Vice President Mohammad-Bagher Nobakht stated in a recent interview that the number of recipients (which reportedly stands at 76 million) was higher than the total population of the country. These statistics indicate that corruption has crept into the management of cash handouts, especially considering that many upper-class citizens never signed up for the program. Consequently, the government seems set to discontinue cash payments to higher-income classes in Iranian society.

Though there is talk about cutting off payments to the top 30% income classes, it is still unclear how this would be implemented and how it would be decided which recipients would be removed from the current list. In fact, the government does not have solid information about the level of income of the upper-income classes in the country, most of whom are self-employed merchants, industrialists and speculative investors. Accurate information about income levels mainly exists for civil servants and employees whose salaries are listed on monthly social security insurance lists. However, the registered salary is only one component of income for many Iranian families, who may look like a middle class family on paper, but who may own properties that generate more revenue in rent than their monthly salaries. A cross-tabulation of information between official salaries and ownership of properties and other assets has never been tried in Iran, though the databases exist.