Iran inflation keeps pressure on Ahmadinejad

Mon Mar 24, 2008 9:20am EDT
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By Alistair Lyon, Special Correspondent

TEHRAN (Reuters) - Ali Daryani is embarrassed at the inflationary pain he is passing on to his customers.

"Sometimes we have to change the price stickers three times a day because of inflation," the 42-year-old Tehran grocer said.

Iran's President Mahmoud Ahmadinejad survived this month's parliamentary election without a big blow to his prestige, even if his core support base among a broad conservative camp shrank.

Now the president's opponents in the Islamic Republic, both from the reformist minority and the victorious conservatives, could force him to rein in populist spending policies seen as partly to blame for inflation hovering around 19 percent.

Since Ahmadinejad swept to power in 2005 promising to spread Iran's oil wealth to the people, soaring world oil prices have swelled national revenues, but economists say colossal subsidies and presidential handouts have predictably fuelled inflation.

Ahmadinejad is basking in support from Iran's Supreme Leader Ayatollah Ali Khamenei for his tough nuclear stance, but his economic record may dent his chances of re-election next year.

Iranians are cushioned by a vast array of costly subsidies, but runaway prices still hit the pockets of ordinary consumers.

"The prices of rice, meat, fruit and everything else have gone up," complained Baqer Gabai, a 54-year-old retired teacher, in Tehran's Mohseni Square. "The price of chicken has doubled in six months, but my income has not changed a bit."   Continued...

<p>A butcher holds money in a butcher's shop in Islamshahr, 50km (31 miles) southwest of Tehran March 5, 2008. REUTERS/Raheb Homavandi</p>