IRAN – Bread prices in Iran are set to increase by up to 25% in more than ten provinces following ongoing financial challenges faced by the Iranian government, which has struggled to maintain subsidies that keep bread affordable for the populace.
According to Etemad, the Iranian government currently subsidises 80% of the final bread price, with consumers paying only 20%.
This system means that the actual price of bread is four to five times its current rate. Bread is a staple in Iranian diets, so such an increase is expected to place considerable financial strain on many families, particularly those living below the poverty line.
The subsidy system for bread in Iran relies heavily on government support for wheat prices. The government guarantees a purchase price to wheat farmers and sells the wheat to bakeries at a subsidized rate.
However, delays and financial shortages have led to mounting issues. Recent reports from the Court of Audit highlight irregularities in subsidy financing and borrowing from Treasury and Central Bank resources.
Specifically, it was noted that the Ministry of Economic Affairs and Finance had to use trust funds to pay wheat farmers, while the Central Bank made payments without adhering to legal regulations.
In light of these financial issues, Mohammad Jalal, an advisor to the Minister of Economy, confirmed that increased bakery costs necessitate a rise in bread prices.
Additionally, the Deputy for Economic Coordination of South Khorasan Province announced a 25% increase in bread prices, further complicating the situation for wheat farmers who are still waiting for their payments.
The Parliamentary Research Center had previously indicated that the bread subsidy allocation for 2024 was insufficient.
The government’s proposed budget includes a bread subsidy of 1.43 quadrillion rials (US$2.33 billion), marking a 150% increase from the previous year.
However, the Center estimates that the required subsidy should be between 1.78 quadrillion rials (US$2.91 billion) and 1.92 quadrillion rials (US$3.13 billion), depending on the scenario.
This discrepancy suggests a likely shortfall in the subsidy fund, ranging from 280 trillion rials (US$457 million) to 420 trillion rials (US$686 million).
Contrary, this comes after the government recently reported that Iran’s wheat production is anticipated to hit 15 million tons in the current crop year (September 2023-2024), according to Alireza Mohajer, the Deputy Agriculture Minister for Cultivation Affairs.
Since March 20, the beginning of the current Iranian year, the government has purchased 9.5 million tons of wheat from farmers, a 15 percent increase from the same period last year.
The government purchased 10.4 million tons of wheat from farmers last year. However, with an annual wheat requirement of 11.5 million tons, Mohajer highlighted that the current production trend will enable the country to achieve self-sufficiency in wheat production.
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