Azernews.Az

The Central Bank of Iran will issue 200,000-rial and 500,000-rial banknotes, if the Ministry of Finance and Economic Affairs approves, Mehr news agency quoted the central bank official Majid Saniei as saying.

Currently, 100,000-rial banknotes are the highest denomination currency in the country.

The society is in need of such high denomination banknotes, the official said.

The administration of Iranian President Mahmoud Ahmadinejad may face up to 171 trillion rials (about $13.8 billion) deficit for paying cash subsidies in line with the subsidy reform plan in the current Iranian calendar year which ends on March 20, Mehr reported.

During the first half of the current year, the administration faced 47.701 trillion rials (about $3.8 billion) deficit. If the same situation continuous, its budget deficit will amount to 171 trillion rials, according to reports released by financial supervisory organizations.

The subsidy reform plan pays out $37 to Iranians while eliminating subsidies for fuels and some commodities. Nearly 74.5 million Iranians receive cash subsidies.

When the plan started in December 2010, it was expected to cause about $32 billion in liquidity. But greater demand for the cash subsidies and the government's money borrowed from the central bank to pay for the subsidies led to $45 billion in liquidity.

The government implemented the first stage of the subsidy reform plan towards the end of 2010 in an attempt to wean the country off food and fuel subsidies. At the time, Ahmadinejad called it the "biggest economic plan of the past 50 years".

It allows the government to gradually slash subsidies on fuel, electricity, and certain goods over the course of five years, with low-income families being compensated with direct cash handouts.