Iran's new economy minister on Tuesday said inflation, which has rocketed up and prompted public criticism of the government, could be curbed but not completely tamed in a year. Shamseddin Hosseini was speaking to parliament just before lawmakers voted to back his appointment.
His predecessor, Davoud Danesh-Jafari, left the cabinet in April with a parting shot at government policies that he blamed for stoking price rises. "I believe that inflation is not a problem that can be solved in one year. But with good planning the flames of inflation can certainly be reduced in a few months," Hosseini told parliament in an address carried live on state radio.
He did not go into details on policy plans. "Despite the many problems that exist, the capacities and capabilities of the country is such that we can solve all those problems hand-in-hand," Hosseini added. Inflation, now around 26 percent, has climbed steadily from around 11 percent since President Mahmoud Ahmadinejad took office in 2005 with a pledge to share out Iran's oil wealth more fairly.
Economists and Ahmadinejad's critics say the government's profligate spending of windfall revenues from crude exports is the main culprit. Other big oil producers in Gulf Arab states also face rising inflation, but don't match Iran's levels.
Price rises are a major gripe for Iranians and the economy is likely to be a key battleground for Ahmadinejad if, as expected, he seeks re-election next year. However, political analysts say whether he retains the support of Iran's ruling establishment may be a more decisive factor in securing victory in the presidential vote.
The UN Security Council has slapped three sets of limited sanctions on Iran since 2006 over its disputed nuclear plans. Iran has brushed off the impact but businesses say the penalties are biting by pushing up trade costs and deterring investors. Hosseini was backed by lawmakers, who have to approve cabinet appointments. But even supporters said inflation was the real worry that needed to be dealt with.
"As you know, inflation is considered to be our country's most major economic obstacle and has imposed heavy pressure on the poor," MP Bahman Mohammadyari said while backing Hosseini. The ministry was managed in a caretaker capacity since April by Hossein Samsami, who critics had said lacked experience.
Samsami had differed with the central bank on several issues, including over whether to let the Iranian rial appreciate against the dollar. The bank said the idea was old and should not be implemented, although both sides denied a row.
Central Bank Governor Tahmasb Mazaheri has differed with the government over interest rate policy, calling for rates to be raised above inflation despite Ahmadinejad's call to lower them. Rates were kept at 12 percent in July for the year 2008/9, still well below inflation, but not cut as the president wanted. Ahmadinejad sent a letter to the central bank this week urging the central bank to unblock problems that he said were preventing state banks from lending, newspapers said this week.