Iran's president has ordered state firms not to raise the prices of their goods and threatened to punish violators, media reported on Tuesday, a move critics say will encourage corruption while failing to tackle inflation.
President Mahmoud Ahmadinejad, who came to power in 2005 vowing to share out Iran's oil wealth more fairly, has been criticised for populist policies, such as forcing down interest rates, that critics say are damaging the economy.
The president's pledges of largesse are still well received at regular provincial rallies but, mid-way into his four-year term, many Iranians increasingly grumble about the difficulties of finding work and voice frustration about surging prices.
Unemployment and inflation rates are both in double digits, and pressure is mounting on Iran over its atomic programme, which has so far led to two rounds of UN sanctions. Economists say the measures are deterring foreign and even local investors. The West accuses Iran of seeking to build atomic bombs, a charge Tehran denies.
The president, whose government has in the past blamed businesses for falsely inflating prices, ordered state firms to keep prices at levels in March, the end of the last Iranian year, the economic daily Donya-ye Eqtesad reported.
"Those directors of government-affiliated companies who have raised prices without ratification of the (state) economic council should be seriously and legally confronted and results should be announced to the public," the daily quoted the order as saying.
State television, which also carried the order, said violators would be "punished" but did not say how. Iranian newspapers in recent days have reported price rises in many staple foods, such as dairy products and fruit.
Economists say efforts to push down prices forcibly would probably backfire by creating illegal markets for goods at higher prices, which would in turn feed inflation. "The president's order is harmful and will create corruption and black markets," said Saeed Laylaz, a former senior official in the previous administration.
Ahmadinejad's government has been accused of fuelling inflation by injecting windfall oil earnings into the economy in a move aimed at helping the poor but which economists say probably is hurting the less well off because of inflation of 17 percent.
Instead of curbing price rises with higher interest rates, Ahmadinejad ordered a cut in lending rates in state-owned banks to 12 percent and 13 percent for private banks, another move criticised by economists.
"For two years, we have been saying macro-economic policies leave a lot to be desired which is why we downgraded the rating last year. It is not getting any better," said Richard Fox at Fitch Ratings. Iran was cut to B+ from BB- in April 2006. In June, 57 economists wrote a critical open letter saying government policies were working against creating a more just society. The government has dismissed such criticism.
"The decision by Ahmadinejad is logical, fair and definite," government spokesman Gholamhossein Elham told a news conference on Tuesday, the offical IRNA news agency reported. He said the government had "a duty" to stabilise prices based on the law.
The government imposed gasoline rationing in June to curb rampant fuel use. Iran has to import about 40 percent of its gasoline needs due to limited refining capacity.
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