Cash transfer as a social policy instrument or a tool of adjustment policy: from indirect subsidies (to energy and utilities) to cash subsidies in Iran, 2010-2014

Cash transfers (CT) whether as income support to the elderly, poor households or other vulnerable groups have been hailed as one of the most innovative and effective social policy initiatives in the developing world. Available evidence suggest that their success would depend on their financial sustainability, low inflation and maintenance of a broad social policy support in areas such as food, health, education and housing. It is against this international experience and evidence that this paper sets out to evaluate the Iranian CT programme that was introduced by Ahmadi-Nejad as part of a major liberalization of energy prices in 2010 in order to bring domestic prices of energy and public utilities (water and electricity) in line with international prices. The Iranian CT programme became one of the largest of its kind in the world, with 90 per cent of population covered and costing 12 per cent of the GDP in 2010. This paper discusses the main characteristics of the Iranian programme and evaluates its impacts on household income, inflation, poverty alleviation and related welfare issues in areas such as health and nutrition. Comparison will be made with some of the major CT programmes around the world (e.g. Mexico and Brazil) to explore lessons that can be learned from such international experiences to reform the Iranian programme towards a targeted approach. It is in this context that the paper will ask whether CT programmes are complementary to or a substitute for broader social policy measures in developing countries.