Iran rolls out 5 million-rial banknote, about $3.10 at market rate

Just before the 12-day war with Israel in June 2025, one dollar traded for around 800,000 rials on Iran’s open market. It now trades at roughly 1,620,000.

The exchange rate has become a blunt signal of economic breakdown, turning the rial into a symbol of dysfunction and accelerating a broader retreat from it as a viable unit for planning daily life.

Policymakers routinely attribute currency surges in Iran to speculation and short-term panic. In reality, the collapse reflects deeper structural imbalances that have pushed the market into a state of chronic disequilibrium.

These pressures fall into two broad categories: chronic domestic problems—persistent budget deficits and a banking system plagued by structural imbalances and quasi-fiscal money creation that drive inflationary pressures—and external shocks, including tightened sanctions, recurring political crises, and the constant threat of war.

Together, these forces transform pessimistic expectations into self-fulfilling inflation.

A failing playbook

Faced with yet another currency crisis, the government has reverted to familiar, largely ineffective tools that may offer brief relief but ultimately deepen instability.

One tactic is “news therapy”—attempts to manage inflationary expectations through signaling and narrative control. Such signals only work when backed by consistent policy, institutional credibility, and public trust.

In Iran, years of broken promises and contradictory actions have eroded that trust, leaving each new round of reassurance less effective than the last.

Officials seek to suppress demand, urging people to “refrain from buying dollars” and insisting that “everything is under control.” But such messages often reinforce pessimism, as an already skeptical public reads them as a warning of further depreciation.

Currency injections—flooding the market to push prices down—have increasingly become a channel for rent distribution and corruption. At best, they buy time at enormous cost. Without addressing root causes, they intensify the recession-inflation cycle and pave the way for sharper future devaluations.

Millions left behind

These currency shocks have devastated daily life for ordinary Iranians, eroding purchasing power and making normal economic planning nearly impossible.

High inflation hits fixed-income households hardest—roughly half of Iran’s workforce—whose wages lag far behind rising prices. Each jump in the dollar translates into lower living standards, pushing millions deeper into economic precarity.

Business owners and large investors, by contrast, are often able to convert assets into more portable stores of value.

Official data point to massive capital flight—around $20 billion in 2024. In the few months prior to the June 2025 war, net outflows reached roughly $9 billion. Given the succession of shocks and Iran’s semi-shutdown state this year, a figure approaching $40 billion for the rest of 2025 appears plausible.

That exodus, in turn, feeds further instability and pushes the dollar higher. In this environment, those lacking the knowledge, access, or means to protect their assets face a growing risk of being left behind.

The specter of dollarization

The rial’s free fall is not merely a temporary crisis; it reflects deep structural failures in Iran’s economy.

Sustainable currency stability would require reforms spanning foreign policy, fiscal discipline, and the restoration of public trust. Instead, Iran’s central bank has shifted away from monetary discipline toward currency-market arbitrage and large-scale gold auctions.

These measures may buy time or temporarily suppress prices, but they contradict basic principles of monetary governance and expose the extent to which the central bank has been reduced to a tool for managing budgetary and political failures.

As trust in the rial as a store of value and unit of account erodes, economic actors will increasingly rely on foreign currencies, further hollowing out the national currency’s role. Without fundamental change, the trajectory points toward dollarization.

For now, the rial’s free fall continues—and Iranian society, especially those least able to adapt, is paying the price of today’s instability and tomorrow’s risk of collapse.

Iran is now enduring the country’s longest and most comprehensive internet disruption on record. Its impact has stretched far beyond blocked platforms and loading screens, pushing many businesses to a point of no return.

Economists estimate Iran’s digital economy generates roughly 30 trillion rials (about $42 million) a day. While modest on paper, that figure represents the livelihoods of small and medium-sized enterprises that operate almost entirely online.

The Tehran Chamber of Commerce estimates that at least 500,000 Instagram-based shops operate in Iran, supporting around one million jobs whose sales effectively drop to zero without internet access.

The collapse began when the signal died

Industry data reviewed by trade groups show daily losses running into billions of rials, with the Chamber reporting revenue declines of 50% to 90%. But some analysts say even those figures understate the damage.

“Where does this figure even come from?” IT expert Amin Sabeti told Iran International. “These businesses operate on Instagram. When people have no access to Instagram, one hundred percent of their sales are gone.”

Sabeti said the lack of precise data had itself become part of the crisis. “What we do know is that Instagram and WhatsApp are widely used by small businesses, and many have now lost customers completely,” he added. “For some people, their entire livelihood depended on these platforms.”

In Iran, platforms such as Instagram, Telegram and WhatsApp function not only as messaging tools but as storefronts, marketing channels and payment gateways.

Analysts estimate more than 40 million active users rely on them, making social media the backbone of e-commerce, especially for home-based businesses, informal retailers and women-led ventures.

“In many cases, people have gone bankrupt because they had issued cheques that can no longer be covered,” Sabeti said. “The reality is that a large portion of online businesses that relied heavily on Instagram have been wiped out.”

One Tehran-based online clothing seller told the news site Dideban Iran that her sales collapsed. After just one week of disruption, she laid off all her workers, shut down her workshop and sold her sewing machines. “I’m bankrupt,” she said.

Another online seller said most digital businesses lack the reserves to survive even days without revenue. “When the internet goes,” the seller said, “whatever tiny capital we have disappears.”

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  Iranian Online Shop Building Sealed As Hijab Tensions Rise

Silence from businesses

Iran International contacted several large and small online businesses to ask about the impact of the blackout. None replied. Messages were not even seen — an absence that spoke louder than any quote.

A few voices surfaced briefly on X. One user wrote that a friend who teaches languages online could no longer earn enough to cover monthly expenses. “Online business is not just online shops,” the post said. “Thousands of jobs depend on the internet, and they’ve been destroyed.”

Another described producers already weakened by months of economic pressure. “In our industrial area, someone with 15 years of production experience is renting out his workshop as a spare-parts warehouse,” the post read. “Last year we had 13 workers. Now we have three.”

Economists warn the damage will outlast restored connections. Prolonged shutdowns erode trust, deter investment and stall technological development. Many business owners say they have lost not only their capital but the will and the means to start again.

Women, who make up a significant share of Iran’s home-based digital workforce, are among the most exposed. For many, online trade was the only viable entry into the economy. With that channel severed, unemployment follows quietly.

“If this situation continues, it can really push the digital economy toward destruction,” said Reza Olfatnasab, head of the union of virtual businesses.

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  Crackdown On Online Businesses Intensifies In Iran

Numbers collide, blame follows

As businesses slipped into silence, the argument over numbers intensified.

Communications Minister Sattar Hashemi said recent outages were inflicting about 5,000 billion rials a day in direct losses on the core digital economy and nearly 50 trillion rials across the wider economy. Around 10 million people depend directly or indirectly on the sector, he said, adding that the average resilience of internet-based businesses is just 20 days.

The hardline daily Kayhan dismissed those estimates as “fabricated figures,” accusing the communications ministry of deflecting responsibility and arguing that officials who failed to build a “secure and lawful” network should be held accountable.

Industry bodies offered competing assessments. Analysts say the gap exposes a deeper problem than the shutdown itself: Iran lacks any transparent, standardized system to measure its digital economy.

For many business owners, however, the debate over billions has already arrived too late. Their screens are dark, their messages unread and their income, whatever the final number, already gone.

Didban Iran website said branches in several banks were running out of banknotes on a daily basis, with customers arriving later in the working day sometimes unable to withdraw cash.

The report comes as inflation continues to erode purchasing power, and analysts have long said Iran’s chronic price rises have increased pressure for larger-denomination banknotes.

According to the Central Bank of Iran’s latest data, banknotes and coins held by the public rose by more than 23% in the first eight months of the current Iranian year, which began on March 21, 2025, compared with 0.8% growth over the same period a year earlier.

Iran’s largest widely circulating note is the 2,000,000-rial “Iran cheque” (about $1.22), which has steadily lost value in real terms.

The report added that the maximum daily cash withdrawal from ATMs has recently been set at 3,000,000 rials (about $1.83), a limit that has pushed more customers to visit branches in person to access larger sums.

The Central Bank has not publicly commented on the reported shortages or whether additional currency issuance is planned.

Financial woes helped spark anti-government protests late last which which were crushed with deadly force, in a bloody crackdown in which security forces killed thousands.

The political uncertainty and a threat of attack by the United States has only deepened

Several economic publications, including Donya‑ye Eghtesad, the state‑run ISNA, and Tejarat News, published guidance on Tuesday advising citizens on how to protect their assets from devaluation, how to plan purchases to minimize the impact of price hikes and when to buy essential goods amid market volatility.

Reports indicate that many people are stockpiling non‑perishable items, viewing goods as safer than cash amid relentless inflation.

Those with savings, they noted, have increasingly turn to gold in any form, seeing it as a hedge against currency devaluation and a liquid asset that can be converted into cash at any time.

At the same time, households are keeping only small amounts of cash on hand, enough to cover basic needs in the event of internet outages that could disrupt ATMs and banking services.

The outlets warned that persistent inflation was fuelling panic buying of basic necessities that was distorting normal spending habits.

Economic malaise has festered as the Iranian rial currency again hit a new low this week and the internal crackdown suggests no near resolution to deep US and international sanctions along with persistent corruption and mismanagement.

US President Donald Trump on Tuesday suggested Iran would face a harsh attack if it did not accede to demands by Washington over its nuclear program and military posture.Iranian foreign minister Abbas Araghchi responded that Tehran was ready with “fingers on the trigger.”

The Shargh newspaper wrote that foreign policy news and not economic it is not economic fundamentals were driving market behavior and fears assets would devalue further.

The Economic dailies predicted that the impact on food and essential goods prices would be sharp and unavoidable.

As Donya‑ye Eghtesad observed, Iran’s economy is effectively in a state of suspended animation, with the key to stability lying in the hands of diplomats.

This prolonged uncertainty, the paper argued, is creating chronic anxiety among the public: a volatile mix of fear, despair, and anger that increasingly blames authorities deemed responsible for managing the crisis.

Signs of reconnection were also observed on Sunday, they said, but restrictions were reimposed shortly afterward. The latest restoration appears broader but still falls well short of a full return to normal service.

NetBlocks, the internet freedom watchdog, reported that although Iran has restored some international connectivity, most websites remain blocked or unreliable unless users rely on circumvention tools like VPNs.

Most ordinary users still face heavy filtering and intermittent service under a whitelist system despite a significant increase in internationally visible networks and datacenters, NetBlocks said in a statement on X.

Whitelist refers to state-sanctioned access for officials or state bodies like banks. Iran's foreign minister and other senior officials have posted statements on social media throughout the shutdown.

Iranian authorities have said the internet outage which began on January 8 was imposed to control recent unrest, which officials blame on foreign interference and the activities of what they call “terrorists.”

The crackdown killed thousands of people and appears to rank among the deadliest attack on protestors in modern history.

Ali Akbar Pour-Jamshidian, deputy for security affairs at the Interior Ministry, addressed questions about when internet access would fully normalize by saying the Supreme National Security Council and the National Security Council had prioritized “public security” over economic considerations.

An uncertain digital future

Many data centers still lack stable internet access, and officials have yet to outline a clear timetable or framework for restoring full connectivity.

Milad Nouri, a programmer and internet expert, warned in comments to the news site Entekhab that the situation signals a deeper shift in network infrastructure. He said it shows the system has moved toward enabling permanent whitelist policies and “tiered internet” not just as a policy choice, but as a technical reality.

Tiered internet refers to granting access based on assessed “needs,” such as allowing media outlets controlled access to platforms like Telegram, while most other traffic remains blocked by default.

Economic damage mounts

The prolonged internet shutdown has inflicted significant damage on Iran’s economy.

Communications Minister Sattar Hashemi has estimated the economic cost of the shutdown at 50 trillion rials per day (roughly $50 million at open market rates).

Speaking on Tuesday, Hashemi acknowledged that domestic platforms cannot function independently of international connectivity and would face serious challenges over time.

“(Claiming) that there is no need for the global internet is only a bitter joke,” he said.

At the same time, Iran’s broader economic indicators have continued to deteriorate. As fears of a possible US or Israeli attack intensified, the national currency fell further, reaching a record low of 1,600,000 rials to the dollar on Wednesday.

The Statistical Center of Iran has announced that point-to-point inflation in January reached 60 percent, meaning households paid on average 60 percent more than a year earlier for an identical basket of goods and services. The Tehran Stock Exchange has also seen several consecutive days of declining share values.

Businesses under strain

Many companies are reportedly facing bankruptcy, while others have laid off employees or downsized operations.

The daily newspaper Haft-e Sobh has reported that newspapers are now filled with advertisements offering office desks and chairs for sale by recently shuttered companies.

Babak Aghili-Nasab, CEO of Postex, told the Digiato news outlet that his company’s order shipments dropped by 80 percent during the shutdown. He said the first and most immediate impact was forced layoffs, adding that he expects to lay off around 60 percent of his workforce starting this month.

While the government has said it will offer loans to compensate affected businesses, Aghili-Nasab rejected this approach, insisting that compensation should be provided as direct grants rather than debt. He said: “You have plundered our house and want to give us loans (to compensate)?”

International trade has also been disrupted. Companies have lost contact with foreign partners and customers, and some trucks carrying perishable goods into Iran have reportedly been stranded at border crossings.

Authorities recently provided limited international internet access at Iran’s Chamber of Commerce. long queues for supervised 20-minute sessions, after filling out written commitments.

For small and home-based businesses, especially those dependent on social commerce—which accounted for about 40 percent of Iran’s online retail sector last year—the outlook remains bleak.

Many have resumed activity after a month without sales, but say they have little hope of meaningful income under current conditions.