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Iranian lawmakers block cuts to cash handouts

Iran's parliament has dramatically weakened the administration's proposed plan to end cash subsidy payments in a politically motivated backlash against the cost-saving effort.
Iranian rial banknotes bearing a portrait of the late founder of the Islamic Republic of Iran, Ayatollah Ruhollah Khomeini, sit on the stand of an Iraqi money dealer on June 19, 2014, in Arbil, the capital of the autonomous Kurdish region of northern Iraq. President Hassan Rouhani said on June 18 Iran would do whatever it takes to protect revered Shiite shrines in Iraq against Sunni militants fighting the Baghdad government. AFP PHOTO/KARIM SAHIB        (Photo credit should read KARIM SAHIB/AFP/Getty Images
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The discontinuation of cash handouts for a large segment of Iranians has become a controversial issue in the initial draft budget for the next Iranian year (beginning March 21). Some suggest that this prospect contributed to the grievances that caused the protests in late December. On Feb. 22, the new framework of cash handouts was finalized as part of the ratification of the coming Iranian year’s budget law. But what are the actual changes introduced by lawmakers, and what are their consequences for the Iranian economy?

President Hassan Rouhani’s administration has been facing a major dilemma in continuing the subsidy reforms that started in 2010. It was predicted that the cash handout program would be revamped after Rouhani’s re-election in May 2017. The changes involve the lifting of subsidies on a variety of things like electricity and water in exchange for monthly cash payments to citizens. To protect the lower income classes and reduce the financial burden on the treasury, the government has had to look for ways to close the income gap.

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