Iran plans to fight rising inflation by limiting the government's role in the economy and encouraging investments in the world's fourth-largest oil producer, President Mahmoud Ahmadinejad said.

'The government has extensive plans to tackle these problems,' Ahmadinejad told state television in an interview, without giving concrete details on how it wanted to bring down double-digit price rises.

Ahmadinejad, who came to power in 2005 on a pledge to share out Iran's oil wealth more fairly, has come under criticism at home for failing to tackle inflation.

Consumer prices in the country rose 19.1 per cent in the year to Nov. 22, according to central bank figures published last week, but many ordinary Iranians complain official data does not correspond to price rises they see in shops.

Economists say profligate spending of Iran's oil revenue is stoking inflation in the state-dominated economy, which has reaped windfall gains from the high crude price in recent years.

Ahmadinejad blamed the price rises on several factors, including Iran's large amounts of subsidies, rapid liquidity growth and the country's dependence on imports and the US dollar, which has declined in value on world markets.

'There were some new elements, such as the increase in oil prices and decrease in the dollar value,' Ahmadinejad said.

The government's plans to combat inflation included 'limiting the role of the government in the economy, expanding both domestic and foreign investments and leading financial and monetary resources towards productive activities,' he said.

Ahmadinejad added: 'We are gradually reducing the amount of subsidies but we can not suddenly cut it.' Iran subsidises gasoline for motorists as well as some other goods, burdening the budget.

He also appeared to hit out at the government's critics, citing 'organised psychological warfare' and saying 'baseless comments disturb the economy”. Reuters