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The fate of the Iranian economy is increasingly shaping debates about the country’s future, one that may prove decisive regardless of how its current political struggles unfold.
Public frustration over rising living costs has once again spilled into protests across the country, shining a harsh light on how state resources are allocated and managed.
The fate of the Iranian economy is increasingly shaping debates about the country’s future—one that may prove decisive regardless of how its current political struggles unfold.
Public frustration over rising living costs has once again spilled into protests across the country, shining a harsh light on how state resources are allocated and managed.
As demonstrations continue, economic indicators are emerging as a central measure of both state capacity and public confidence.
That tension is visible in Iran’s draft budget for the next fiscal year, beginning on March 22. The document offers a snapshot of priorities at a moment marked by military confrontation, diplomatic strain and widening economic pressure.
A budget shaped by security concerns
According to the draft, the government has projected just 1,850 trillion rials in oil export revenues for itself—equivalent, at the official exchange rate, to roughly $2 billion.
By contrast, allocations tied to military and security institutions account for at least 16 percent of total budgetary resources, while the share of oil export revenues linked to the Islamic Revolutionary Guard Corps is estimated to be several times larger than that of the civilian government.
Funding for religious institutions is projected at close to half of the government’s oil income.
At the same time, projected tax revenues have risen by 63 percent, signaling a heavier burden on households and businesses amid high inflation and weak purchasing power.
Taken together, the figures raise questions about how effectively state revenues are being translated into economic stability or improved living standards. They also complicate expectations that external relief alone—such as sanctions easing—would be sufficient to reverse economic decline.
An economy with untapped potential
Official data underscore the scale of resources involved.
Even under extensive sanctions, Iran’s crude oil export revenues over the past five years have totaled approximately $193.5 billion.
Yet over roughly the same period, Iran’s gross domestic product has contracted sharply, falling from around $600 billion in 2010 to an estimated $356 billion in 2025. The divergence between export earnings and overall economic output has become a central puzzle for analysts.
According to Iran’s Central Bank (CBI), the country earned $65.8 billion from exports of oil, petroleum products and gas in the last fiscal year, while total general government revenues projected in the new budget amount to about $45 billion.
Growth, allocation and the missing link
In purely arithmetic terms, current energy exports alone exceed projected state revenues, even before accounting for taxation, domestic fuel sales or other income sources.
The structure of Iran’s economy further complicates comparisons with other sanction-hit or conflict-affected states. Services account for more than half of GDP, and non-oil exports remain substantial, according to the CBI—a markedly different profile from countries such as Iraq, where non-oil exports account for less than 10 percent.
These figures suggest that Iran’s economic capacity, diversification potential and revenue base remain significant, even under constraint.
The unresolved question is not one of resources alone, but of how those resources are absorbed, allocated and converted into sustainable growth.
As protests continue and political outcomes remain uncertain, the condition of the economy—more than any single diplomatic or security development—is likely to shape Iran’s trajectory in the years ahead.
Iran’s plan to issue monthly coupons worth about $7 to nearly the entire population has prompted warnings from local economists and media that it could stoke inflation and strain already weak state finances, even as authorities present it as a way to ease anger over soaring prices.
The daily Setareh Sobh called the move an “economic gamble,” recalling that the currency has lost around 20,000 percent of its value since 1979 and blaming decades of policies including hostage‑taking, hostility toward the West and Israel, and mismanagement, while economist Mahmoud Jamsaz argued the government “lacks the executive power” even to pay public employees’ salaries and officials themselves admit the scheme could drive prices of basic goods up by 20 to 30 percent.
Tehran’s plan to distribute cash handouts to nearly the entire population appears aimed at calming protests driven by relentless price increases. Whether it will work remains an open question.
Officials say the payments are meant to offset the elimination of a subsidized exchange rate previously used to import essential goods, a policy shift that has already pushed prices higher.
Under the plan, the government would issue monthly coupons worth one million tomans—about $7 at the open-market rate—to every Iranian.
Some economists have questioned whether the measure can achieve its stated aim.
In an editorial published on January 5, the daily Setareh Sobh described the policy as an “economic gamble,” warning that similar efforts in the past had failed to stabilize prices or restore public confidence.
The paper noted that Iran’s currency has lost roughly 20,000 percent of its value since the 1979 revolution, when the dollar traded at seven tomans.
“This devaluation,” the daily wrote, “is the result of policies such as hostage-taking, hostility toward the West and Israel, mismanagement and the exclusion of experts from parliament and government.”
Questions of feasibility
Mahmoud Jamsaz, a leading Iranian economist, went further, arguing that the handouts risk aggravating the very pressures they are meant to relieve.
“Under current conditions,” he wrote, “the president knows very well he lacks the executive power even to pay government employees’ salaries.”
The government has acknowledged inflationary risks. Fatemeh Mohajerani, a government spokeswoman, told reporters on Sunday that the policy could raise prices of some essential goods by 20 to 30 percent.
Labor Minister Ahmad Maydari said the payments would be issued as coupons redeemable for basic commodities, rather than cash transfers, in an effort to limit price pressures.
Still, critics question whether the state has the fiscal capacity to sustain such a program, particularly as tax revenues are already under strain.
A broader breaking point
Public reaction has been largely dismissive.
On social media, many pointed to continued protests despite the announcement, stressing that rising prices were only one factor behind demonstrations that have spread across more than 200 cities and towns.
Sociologist Taghi Azad Armaki told the Shargh newspaper that the unrest reflected “accumulated, unresolved social and political challenges,” adding that economic hardship had exposed deep divides within Iranian society.
“These gaps,” he said, “have eroded the government’s social capital and heightened concerns about the country’s future.”
Reformist commentator Abbas Abdi echoed that concern in Etemad, warning that Iranian society had reached a critical threshold. “Society has a breaking point,” he said, “and Iran is rapidly approaching it.”
Even Iran’s tightly controlled press has increasingly described the demonstrations as political in character, reflecting broader dissatisfaction with governance rather than price levels alone.
For now, the government appears to be betting that targeted relief can buy time. Whether it can ease public anger—or instead accelerate inflation while leaving deeper grievances unresolved—remains uncertain.
Videos shared on social media appear to show Islamic Republic security forces in the town of Koushk, near Isfahan, using not only large amounts of tear gas but also other crowd‑control munitions against protesters, with visible trails of fire from projectiles passing close to demonstrators.
The reports describe the incident as taking place on Sunday night, January 4, but Iran International cannot independently verify the footage.
