Iran cuts food, fuel subsidies

Iran has cut energy and food subsidies, risking a repeat
of angry protests which followed fuel rationing in 2007.

The cuts, introduced on Sunday, mean a four-fold rise in
the price of petrol and reduced subsidies for bread.

Each car will get 60 litres of fuel per month at a
subsidised price of 40 cents per litre, up from 10 cents per litre.

Iran, whose fragile economy has been hit by United
Nations sanctions, has said it pays about $100bn (£64bn) in subsidies annually.

In 2007, protesters set alight dozens of petrol stations
after the system of fuel rationing was introduced.

News agency reports on Sunday said there was a heavy
police presence in the capital Tehran, but there were no reports of trouble.

Iran’s President Mahmoud Ahmadinejad said on Saturday
that the cuts in subsidies were the “biggest surgery” to the economy
in 50 years.

Mr Ahmadinejad also said his government was paying $4bn
in bread subsidies, which are being gradually phased out.

Inflation

Iran’s oil-based economy has been hit by four rounds of
UN sanctions, as well as those from individual countries over its controversial
nuclear programme.

The government says that under its Subsidy Smart Plan,
money from increased prices will be returned to the people through cash
payments.

But some economists fear the increased prices, which also
apply to electricity, water, and flour, will fuel inflation, already thought to
be running at 20%.

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