Iran says food prices to jump as currency subsidies end

Prices of basic goods in Iran are expected to rise by 20% to 30% in the coming weeks, with sharper increases likely for chicken, eggs and cooking oil, government spokesperson said on Monday.

Fatemeh Mohajerani said the increase was the result of the government’s decision to end subsidized dollars for essential imports in an effort to stabilize the foreign exchange market and curb corruption, a move that has pushed up the local-currency cost of imports of goods and raw material.

“It is evident that by ending or reducing subsidized and preferential official foreign currency exchange rates, the prices of some items will rise,” she said.

Earlier on Monday, parliament said it had approved the general outlines of the budget for the next Iranian year, which begins in March, after the bill was initially rejected and subsequently amended by the government.

The government described the changes as reforms aimed at improving livelihoods, as authorities seek to ease ongoing anti-government protests and strikes.

The revisions are said to include a pay rise of up to 43% instead of 20%, a cut in value-added tax to 10% from 12%, and the allocation of $8.8 billion in subsidized foreign exchange to curb price rises for basic goods.

The budget was also reported to earmark funds for guaranteed wheat purchases to supply bread and for adjusting pensioners’ salaries.

Lawmakers approved the budget framework with 171 votes in favor, 69 against and six abstentions, out of 246 lawmakers present.

Meanwhile, nationwide protests entered a ninth day on Monday, with merchant strikes continuing in parts of the country.

The unrest began after the rial fell to record lows in late December and has since broadened into a wider test of the government’s ability to manage a country under sustained economic strain.

As Tehran fixates on the dollar, protests move beyond it

Jan 1, 2026, 20:48 GMT

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Maryam Sinaiee

As protests once again ripple across Iran, the country’s political establishment is moving quickly to revive an economic reform agenda that many Iranians say no longer speaks to the core of their anger.

While demonstrators chant against the entire system, the government of President Masoud Pezeshkian has focused its response on reshuffling economic managers and pressing ahead with long-delayed currency reforms, betting that technical fixes can still defuse a crisis that has increasingly become political.

The renewed unrest was triggered by a sharp bout of currency volatility that briefly pushed the U.S. dollar to around 1.45 million rials on the open market, intensifying already high inflation and accelerating the erosion of purchasing power.

“Protesting the dollar is protesting instability; protesting a life that cannot be planned,” wrote journalist Mustafa Danandeh in the daily Ettelaat. “People who do not know whether six months from now their rent will double, medicine will be available, or their job will survive.”

A new old face

In response, Pezeshkian reshuffled the leadership of the Central Bank of Iran, reappointing Abdolnaser Hemmati and reviving a controversial push toward a single exchange rate—an idea long advocated by economists but repeatedly stalled by politics, sanctions and entrenched interests.

Hemmati, a prominent centrist figure, had been forced out less than seven months into his tenure as economy minister after parliament impeached him over exchange-rate volatility.

His return—this time to a post that does not require parliamentary approval—has infuriated hardline lawmakers and highlighted widening rifts within the political elite.

“This explicitly ignores parliament’s vote and shows disregard for the will of representatives,” said Zeynab Gheisari, an ultra-hardline lawmaker from Tehran. Another hardline legislator, Amir-Hossein Sabeti, said the move demonstrated the government’s “disregard for the people and the country’s economy.”

In his first public remarks after the appointment, Hemmati laid out familiar priorities: controlling inflation, managing the foreign exchange market and tightening oversight of banks.

It’s the economy—or is it?

The reform effort centers on dismantling Iran’s multi-rate currency regime, a system dating back to the Iran–Iraq war of the 1980s, when preferential exchange rates were introduced to subsidize essential imports. Over time, the widening gap between official and market rates turned the system into a major source of rent-seeking, corruption and uncertainty.

As the business news outlet Tejarat News noted, the policy “failed to provide sustainable support for domestic producers and created severe uncertainty for investment and production planning.”

The Entekhab news site cautioned that in an economy burdened by sanctions, fiscal shortfalls and political distrust, inflationary expectations tend to regenerate quickly once short-term interventions fade.

On Thursday, the president announced the immediate elimination of the subsidized exchange rate of 285,000 rials per dollar for basic goods and animal feed imports, saying the subsidy would instead be transferred directly to consumers to eliminate “rent, bribery and corruption.”

In unusually blunt remarks, Pezeshkian acknowledged that public anger was directed at the state itself. Dissatisfaction, he said, was the government’s responsibility, adding that “there is no need to look for America to blame.”

Many protesters appear keenly aware that Pezeshkian’s authority is tightly constrained by entrenched power centers, a reality reflected in slogans that target the theocratic system itself and its supreme leader rather than the exchange rate.