Iranian President Masoud Pezeshkian said on Thursday that his government would stop distributing a heavily subsidized exchange rate, blaming the system for encouraging rent-seeking and failing to protect households despite billions of dollars in state support.
Speaking at a meeting with political and social activists in Chaharmahal and Bakhtiari province, Pezeshkian said the 28,500-toman dollar – one of several preferential exchange rates used in Iran – would no longer be allocated.
“Anyone who received the 28,500-toman dollar pocketed it, so we will not give it out anymore,” Pezeshkian said, arguing that multiple exchange rates had benefited intermediaries rather than consumers.
Iran has long used subsidized exchange rates to support imports of basic goods and curb inflation, but critics say the system has encouraged corruption and widened inequality, particularly as sanctions and high inflation have strained the economy.
Pezeshkian said the government had spent about $18 billion on subsidies, adding that the funds could be used more effectively to improve living standards.
“We have given $18 billion in subsidies, when with this amount we could plan so that everyone’s table is the same,” he said.
Late last month, Hossein Samsami, a member of parliament’s economic committee, said more than $116 billion in export earnings had not been repatriated since 2018, citing official non-oil export data.
The president added that subsidies would not be eliminated but redirected to end consumers rather than producers or intermediaries. He said foreign currency allocations for sectors such as livestock feed would be moved to the final stage of the production chain.
“We are not removing subsidies; we are giving them to the final consumer,” Pezeshkian said.
Iran operates several exchange rates, including a market rate that trades far weaker than official or subsidized levels, creating price gaps that economists say incentivize arbitrage.
The preferential exchange rate system was introduced in April 2018 under former president Hassan Rouhani, when the dollar was fixed at 42,000 rials in an effort to stabilize prices amid mounting sanctions.
Iran’s economy has been under sustained pressure from US sanctions, high inflation and currency depreciation, complicating repeated efforts by successive governments to reform subsidies and unify exchange rates.
The decree, issued in Vahidi’s former name Vahid Shahcheraghi and read out at a handover ceremony, said the appointment was made following a proposal by the IRGC commander. Senior Guards commanders and military officials attended the event.
Vahidi has been implicated by Argentine prosecutors in the 1994 bombing of the AMIA Jewish community center in Buenos Aires, which killed 85 people.
At the time, Vahidi was the head of the Quds Force, the external operations branch of Iran's sprawling paramilitary organization the Islamic Revolutionary Guard Corps.
Interpol said in a 2009 statement that a red notice for Vahidi was issued in November 2007 at Argentina’s request, adding that a red notice is not an international arrest warrant and that any decision to detain an individual rests with national authorities.
Argentina’s foreign ministry said in April 2024 that it wanted Vahidi arrested in connection with the AMIA case when he traveled abroad as part of an Iranian delegation. Iran has repeatedly rejected allegations of involvement in the attack.
The United States has sanctioned Vahidi for his role in Iran’s suppression of protests, including the use of lethal force by security services during demonstrations sparked by the 2022 death of Mahsa Amini.
The Treasury Department said Vahidi oversaw law enforcement agencies involved in serious human rights abuses and had earlier been sanctioned over alleged links to Iran’s nuclear and weapons programs.
Iranian media have described Vahidi as a veteran Guards commander who held senior posts spanning the IRGC’s intelligence and overseas operations and later served in cabinet roles, including as defense minister and interior minister.
Historically, in Iran, religious institutions and conservative merchants—the Bazaaris—were inseparable allies. It was the Bazaaris who bankrolled the anti-state revolution of 1979, famously chartering the plane that carried Ayatollah Khomeini back to Tehran.
Yet, 46 years later, the Islamic Republic has managed to alienate its oldest and most critical constituency. For the Iranian merchant today, that alliance is dead, and commerce has become a losing game.
Despite having no hand in inflation, merchants are often blamed as price gougers. If they reject state-mandated pricing, they are accused of hoarding and tampering with the market; if they comply, they may not be able to afford to restock their inventory, selling their way into bankruptcy.
Simultaneously, the centralized allocation of foreign currency for imports drags on for months, while exporters are forced to sell their hard-earned foreign currency at losses due to state pressure.
The atmosphere grew more volatile last week with the announcement of a new gasoline pricing policy, which exacerbated existing anxieties about the economy.
The release of the next year’s budget was the last straw. With oil revenues projected to cover a mere 5% of administrative costs, the government wants the public to foot the bill through deficit spending and significant tax increases.
The trade-off is stark: while every subsidy has been stripped from the ledger, the budget for security and defense has increased. By prioritizing the military and security over public welfare, the state has effectively transferred the entire burden onto the people’s dinner tables.
The market is rejecting this pressure. Merchants argue that they are being suffocated to fund the state's regional ambitions. Facing chronic 60% inflation and the weight of sanctions, business owners can no longer survive, let alone profit.
The message from the bazaar is clear: the economy cannot sustain the vows to rebuild the missile arsenal.
The state’s response to the protests has been predictable: a photo-op meeting with a handpicked group of supportive businessmen and the scapegoating of the Central Bank Governor.
The dismissal of Mohammad-Reza Farzin had been on the table for months, held in reserve as a sacrificial offering. Now, with protests spreading throughout the country, the administration offers his firing as a promise of change.
But the Iranian people see through this theater. They know the Central Bank Governor is not an independent policymaker, but a mere functionary. Replacing him with Abdolnaser Hemmati—a recycled official previously fired from the same post over rial's devaluation—signals continuity, not reform.
Public slogans reveal that the bazaar and the street are now speaking with one voice. The grievances have moved beyond daily economics; they challenge the specific governing priorities that drive this decline. The public understands that their economic distress is not an accident of mismanagement, but the calculated cost of the state's strategic choices.
This leaves the Islamic Republic with a binary choice: abandon regional ambitions and missile proliferation to return to the negotiating table, or double down on repression.
As evidenced by the direct fire opened on protesters yesterday, the regime has chosen the path of force. The market’s message is unmistakable: the people want fundamental change. The government’s answer is not reform, but bullets.
