Iran’s Inflation In March Broke Eight-Decade Record

Central Bank of Iran’s (CBI) latest figures indicate that in April inflation reached a level unprecedented since the Anglo-Soviet invasion of Iran in 1942.

In a May 25 article entitled “Revolutionary Government Breaks 81-Year Inflation Record in Iran”, Aftab News, a website close to former President Hassan Rouhani listed the annual inflation rate over the years for comparison, pointing out that in 1990, a year after the end of the eight-year Iran-Iraq War, inflation was only 9 percent, in 1996 it had risen to around 23 percent, in 2006 it was less than 12 percent while in 2015 it was slightly over 11 percent.

Official figures released by the CBI indicate that prices in the food group rose by 79 percent between April 20, 2022, and April 20, 2023.

The CBI and the Statistics Center of Iran have only published partial figures on inflation and other economic indicators over the past two years, with many doubting the veracity of the official numbers.

Economist Mohsen Ghobadlou told Aftab News that many people believe prices of items in the food basket have increased by over 100 percent.

Ghobadlou also said to reduce inflation the government needs to take “real” measures including resolving the issue of sanctions and Iran's accession to the international watchdog, the Financial Action Task Force (FATF), reducing its own expenditures, and reducing liquidity, rather than “making promises and hackneyed slogans”.

Iran has been on the FATF blacklist, along with North Korea, since February 2020 for failing to pass legislation introducing transparency measures designed to combat money-laundering, corruption, and financing of ‘terrorism.’ FATF members – who host most of the world’s financial centers – are required to undertake enhanced diligence and countermeasures against blacklisted states.

Economist Mehdi Pazouki told Aftab News, a website close to former President Hassan Rouhani, that the government and parliament have estimated astronomical revenues from oil exports, which could only be realized if oil prices reach $300pb.

“Naturally failure to realize such revenues means a budget deficit,” he said, which in turn will force the central bank to print money. Printing money causes liquidity growth and higher inflation and eventually a drop in purchasing power of the people, he added.

Rahim Mombeini, deputy head of Iran’s Planning and Budget Organization, said Saturday that Iran’s budget deficit for the previous Iranian year –which ended on March 20 – was about 8,000 trillion rials (about $16 billion in today’s exchange rates), or over 30 percent of the operating budget.

A report published by the Parliament’s research center on May 23 said that currently over one-third of Iranians live under the official poverty line and that anything such as a rise in rents or costs of treatment for an illness could quickly push many among the middle class down to below the poverty line. According to the same report, the rate of poverty rose from 19.4 percent in 2011 to over 34.4 percent in 2021 and 11 million Iranians dropped below the poverty line during this period.

“The middle class, particularly the cultural middle class, is the driving force of cultural, social, and political change but in these circumstances, the middle class will shrink considerably while the lower classes will become more dependent on government aid to survive and may even be driven to rioting,” an Iranian political analyst who requested anonymity told Iran International.

“People’s priorities in spending will also drastically change with the drop in their purchasing power and become limited to bare necessities such as food and housing which they will no longer afford to buy due to lack of savings,” he added.