Iran’s parliament has approved President Mahmoud Ahmadinejad’s budget for 2010-11 despite fears that planned cuts in subsidies could spark rapid inflation.

Ahmadinejad submitted a $368bn national budget bill to parliament on 24 January. This was reduced to $347bn, based on an average $65 for a barrel of oil for the period from March 2010-11, state-owned Mehr news reports.

Out of 226 members, 151 voted to approve the outlined budget, according to Ali Larijani, speaker of parliament.

The budget includes plans to phase out food and energy subsidies over the coming year. Parliament amended the government’s estimate of savings from subsidy cuts to $20bn from the original $40bn (MEED24:12:09).

Tehran plans to distribute oil revenues directly to social programmes for poorer sectors of the population, a move intended to soften the blow of subsidy cuts. This may prove problematic for the Islamic republic if oil prices fall.

Inflation currently stands at 8.9 per cent, having hit almost 30 per cent in late 2008.