Oil, gas and Iran economic analyst
Iran began its new fiscal year on March 21 amid deepening economic and energy crises, with even officials of the Islamic Republic acknowledging that conditions are likely to worsen in the year ahead.
Meanwhile, the return of Donald Trump to the White House and the revival of the US administration’s maximum pressure policy have further tightened the noose on Iran’s economy.
While the Central Bank reported a year-on-year inflation rate of 45% last month, local media suggest that actual price increases are far higher. In reality, the cost of food, medicine, and other essential goods has nearly doubled.
Moreover, the fiscal year is ended with the US dollar surging to nearly 1 million Iranian rials, marking a 65% increase since the beginning of the past fiscal year. The depreciation of the rial has accelerated sharply in recent days.
At the same time, Central Bank data reveals that Iran’s foreign reserves have been rapidly depleting, plunging to just one-fourth of their level in March 2024 and a mere tenth of their March 2023 levels.
Iran’s foreign trade situation:
The latest figures from the Central Bank show that Iran's foreign exchange revenue crisis persisted in the first half of the current fiscal year, which began on March 20, 2024. No data has yet been released for the second half of the year.
During this period, Iran recorded a positive overall trade balance of $11.5 billion, including oil, goods, and services. However, the country also experienced capital flight totaling $12.5 billion.
As a result, the net balance of foreign currency inflows and outflows—including gold bullion—turned negative.
Given the sharp decline in Iran’s oil exports to China since September, the situation is expected to worsen—particularly as oil, petroleum products, and natural gas account for more than half of the country’s total exports.
Over the first 11 months, Iran has imported approximately 93 tons of gold bullion worth $7.3 billion in exchange for its oil and goods exports—three times the amount imported in the previous year. More than 55% of this gold was purchased from Turkey.
Indeed, around 13% of Iran’s total oil and non-oil exports have been bartered for gold instead of foreign currency. This highlights the government’s inability to collect payments for exported goods and oil and transfer foreign currency into the country, due to US banking sanctions. As a result, Iran is facing a severe shortage of foreign exchange reserves.
Government debt crisis
Recent data from the Central Bank shows that the Iranian government’s debt to the banking system has surged by 41% during the current fiscal year. To cover its widening budget deficit, the government has relied heavily on borrowing from domestic banks, tapping into the National Development Fund, and issuing bonds.
According to the International Monetary Fund (IMF), Iran’s total government debt now exceeds $120 billion—roughly one-third of the country’s economy. In contrast, Iran’s total external debt, including both governmental and non-governmental liabilities, stands at less than $10 billion—just 2% of GDP—underscoring the country’s extreme financial isolation and the reluctance of international institutions to fund Iranian projects.
Two decades ago, before the imposition of heavy sanctions, Iran’s external debt was more than 12% of GDP, largely driven by foreign investment in oil and gas projects. Today, the government’s increasing dependence on domestic borrowing has sharply boosted liquidity, further fueling inflation. Over the past year alone, liquidity in Iran has risen by 28%.
The economic crisis has pushed more Iranians into poverty. Official reports suggest that one-third of the population lives in extreme poverty. However, based on the World Bank’s global poverty standards, around 80% of Iranian households earn less than $600 per month and fall below the poverty line.
Energy and Water Crisis
For the first time, Iran has experienced electricity and gas shortages across all seasons. During peak summer demand in 2024, electricity shortages reached 20%, while winter gas shortfalls surged to 25%. Officials warn that energy shortages could worsen by at least 5% in the next fiscal year.
Industrial reports show that since summer 2024, energy disruptions have forced 30–40% of Iran’s industrial capacity to shut down. At the same time, the country has been grappling with growing gasoline and diesel shortages since 2023. Without new refinery projects, these fuel deficits are expected to escalate rapidly.
Meanwhile, Iran’s water crisis has reached a critical stage. Tehran’s main reservoirs are reportedly at just 7% capacity, and officials warn of severe water shortages by summer 2025.
