Font Size

- Aa +

Thu 11 Oct 2007 01:06 AM

Font Size

- Aa +

Iran to take on inflation

Gov't says problem is under control and spending issue has been exaggerated by the media.

Iran's government aims to cut inflation to single digits and says price rises are in part due to spending to help the poor not mismanagement, presidential aides said on Wednesday.

Inflation, which according to official figures was more than 17% in the past year, is a chief grumble for many Iranians and has sparked rising complaints about President Mahmoud Ahmadinejad's government.

Economists say profligate spending of windfall oil revenues is behind the price surge. Ahmadinejad's opponents accuse him of poor economic planning.

The government says the problem is under control and has been exaggerated by the media. It insists state spending is a vital part of a plan to share out oil wealth more evenly.

"Of course our dream is to have single-digit inflation. We believe that inflation is constructive if it is between 5-9%," presidential media adviser Mohammad Kalhor said.

He also told Reuters single digit inflation was a "target" but did not give details about when it would be reached. He said inflation between 5-9% was appropriate for a country seeking to develop its infrastructure and industry.

Another presidential aide, Ali Akbar Javanfekr, said inflation was in part being imported because of rising prices abroad but added that it was also due to "so many investments" by the state in infrastructure and other areas.

He said, for example, the price of land in some rural areas had risen because of assistance provided by the government to villages that had made such areas more attractive to cultivate.

"Therefore our inflation has a logic, not because of mismanagement," Javanfekr added.

Ahmadinejad swept to power in 2005 by pledging to close the gap between the wealthy and those struggling to make ends meet in the world's fourth largest oil producer.

Critics agree the gap needs closing but say the government has used state largesse to "buy" support while ignoring the long-term damage caused by inflation. They also say it has deterred private business with interventionist policies, such as blaming companies for overpricing products.
While complaints about inflation have grown louder, particularly in cities, anecdotal evidence suggests Ahmadinejad still has many supporters in the provinces, which he has regularly toured, promising new roads and other amenities.

Kalhor agreed Ahmadinejad was more popular in the provinces, saying: "In deprived areas ... the development is visible."

But he said cities were also benefiting from investment, including new public transport such as buses and taxis, which citizens of Iran's sprawling capital regularly complain are in short supply.