UPDATE 1-Iran parliament votes to halt subsidy reform plan

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DUBAI, Oct 7 (Reuters) - Iran's parliament voted on Sunday to suspend plans for further reform of the country's food and fuel subsidies, with legislators citing economic pain caused by the plunge of the rial currency, Iranian media reported.

Subsidy reform has been a centrepiece of the economic policies of President Mahmoud Ahmadinejad, so parliament's vote was a political blow to the president at a time when he faces growing public discontent over the rial's slide.

Of 240 members of parliament present, 179 voted for a bill halting the second phase of subsidy reform, while 17 voted against the bill and 20 abstained, according to the Iranian Labour News Agency (ILNA). Final details of the bill must still be approved by parliament, ILNA reported.

The reform aims to ease pressure on state finances by cutting tens of billions of dollars from the amount which the government pays to subsidise low consumer prices for food and fuel, while offsetting the impact on Iran's poorest citizens by giving them monthly cash payments.

"In conditions in which the inflation rate is increasing and the currency market is in disorder, the second phase of this law must be stopped," said Gholamreza Mesbahi-Moghaddam, head of parliament's budget and planning committee and author of the bill, according to parliamentary news agency Icana.

The government introduced the first stage of subsidy reform in late 2010. At the time, Ahmadinejad called it the "biggest economic plan of the past 50 years".

But domestic critics including many members of parliament say the reform has contributed to soaring inflation, which according to the government is running at around 25 percent, and has been used by Ahmadinejad for his own political benefit, because he can control welfare payments under the scheme.

(Reporting by Yeganeh Torbati; Editing by Andrew Torchia, Ron Askew)

((yeganeh.torbati@thomsonreuters.com)(+971 50 698 8495)(Reuters Messaging: yeganeh.torbati.thomsonreuters.com@reuters.net))

Keywords: IRAN ECONOMY/