Iran’s Economy Teeters Amidst Currency Policy Controversy
The Iranian toman versus the US dollar
Written by
Mansoureh Galestan
Iran’s economy faces mounting challenges as the Pezeshkian government struggles to curb its budget deficit, cloaked in a narrative of anti-corruption and economic reform. The latest initiative, a policy to unify the currency exchange rate, has spurred criticism for its immediate impact on inflation and cost-of-living increases.
The Iranian economy is experiencing a catastrophic freefall. Inflation and skyrocketing prices dominate daily life, with the free-market exchange rate for the US dollar reaching a historic high of 80,250 tomans, up from 59,000 tomans just five months ago—a staggering 35% increase. Similarly, state media reports that the price of gold surged to 56 million tomans for an “Imam” gold coin on December 23. These record-breaking figures underscore the severity of the country’s economic turmoil.
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State media and officials have framed the single exchange rate policy as an effort to combat corruption and reduce rent-seeking behaviors. However, as highlighted by sources like the state-run Kayhan on December 26, the immediate effects are far from beneficial, with inflationary pressures causing widespread economic distress. Promises of future relief seem increasingly implausible.
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Budget Deficit and Government Mismanagement
The currency crisis is rooted in deliberate state policies aimed at addressing budgetary shortfalls. The government centralizes revenue from oil and non-oil exports, selling foreign currency at exorbitant rates in the free market to generate profits. This approach has exacerbated inflation while funneling economic gains away from the public and into state coffers.
On December 24, Hossein Samsami, a member of the economic commission in the regime’s parliament, openly criticized the government, stating, “The main driver behind the dollar’s price increase is the coordinated actions of the government and parliament, with the central bank as their tool. This policy seeks to cover budget deficits by essentially taking from people’s pockets.”
State officials, such as Economic Minister Abdolnasser Hemmati, have deflected blame for the skyrocketing exchange rates. Hemmati, on December 23, claimed that the government has little control over non-oil export earnings, which do not return to the country, a position that has been met with skepticism given the state-controlled nature of Iran’s economy.
Inflation and Public Suffering
Inflation is ravaging households, especially in essential goods and services tied to imports. Despite claims that price stability is a government priority, the market has swiftly reacted to the currency devaluation, driving up costs for everyday necessities. Rivals, including MP Ebrahim Zare on December 25, have decried the government’s failure to manage its budget transparently or invest in public infrastructure.
The Pezeshkian government’s attempt to address chronic inflation by removing zeros from the national currency is another contentious move. Framed as a measure to reduce the psychological impact of large transaction figures, this policy fails to address the systemic causes of inflation and economic instability.
Exodus of Talent and Broader Implications
The worsening economic conditions have fueled an unprecedented wave of migration, with Iranian emigration rates surging by 141% between 2020 and 2021, according to the newspaper Hamdeli on December 25. Over 200,000 highly skilled professionals have left Iran in recent decades, depleting the nation’s talent pool and crippling its capacity for sustainable development.
While officials like Samsami acknowledge the economic turmoil, there is no consensus on viable solutions. Structural issues, such as a lack of private-sector participation and rampant corruption, remain unaddressed. Parliamentarian Rouhollah Mousavi on December 25 described the economy as “on life support,” with more than 90% of industrial units operating below capacity.
Despite the Pezeshkian government’s claims that its currency policies will yield long-term benefits, the immediate effects paint a starkly different picture. The rising cost of living, combined with widespread unemployment and systemic corruption, has left many Iranians disillusioned and struggling to make ends meet.
As Iran’s economic woes deepen, the nation teeters on the brink of an imminent uprising. Public frustration with rising costs, systemic corruption, and unfulfilled government promises has created a volatile environment, where citizens are merely seeking the right spark to gather and make their voices heard.