Iran’s government budget reveals tough road ahead as currency hits new low

Tehran, Iran – Iran’s currency has been registering caller lows amid ongoing economical turmoil that is besides reflected successful a planned fund for adjacent twelvemonth that efficaciously shrinks nationalist spending.

Each United States dollar was priced astatine astir 1.36 cardinal rials successful the unfastened marketplace connected Wednesday successful Tehran, its highest complaint ever, earlier the Iranian currency somewhat regained crushed connected Thursday.

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The embattled nationalist currency has been rapidly declining implicit caller weeks arsenic the US and its Western allies heap connected their sanctions and diplomatic pressure, and the menace of different warfare with Israel lingers.

President Masoud Pezeshkian this week sent his administration’s finalised projected fund to the hardline-dominated parliament for the upcoming Iranian calendar year, which starts successful precocious March. The fund volition past person to beryllium greenlit by the 12-member Guardian Council earlier being ratified into instrumentality successful the coming weeks.

The presented fund nominally grew by conscionable implicit 5 percent compared with past year, but ostentation presently stands astatine astir 50 percent – indicating that the authorities envisions little spending portion managing a alleged “resistance economy” arsenic it faces a monolithic fund crunch yet again.

But minimum wages are to beryllium raised acold beneath the ostentation rate, too, astatine lone 20 percent, meaning that Iranians are erstwhile much guaranteed to person acold little spending powerfulness adjacent twelvemonth arsenic the embattled nationalist currency sinks.

Iranians presumption decorations arsenic they hole to observe the Yalda feast, an past contented marking the onset of wintertime and the longest nighttime of the year, successful Tehran, Iran, connected December 20, 2025 [Abedin Taherkenareh/EPA]

At the aforesaid time, the fund says the authorities sees taxes rising by a monolithic 62 percent adjacent year, arsenic authorities effort to gradually alteration dependence connected lipid revenues amid US efforts to thrust down Iranian exports, which are carried by a shadiness fleet of ships mostly to China.

At the existent speech rate, the full fund is worthy astir $106bn, respective times little than the projected 2026 budgets of determination players similar Turkiye, Saudi Arabia and Israel.

Iran’s rent-distributing multi-tier speech complaint system is inactive astatine play, with the authorities proposing allocating a complaint for customs duties, import valuation and fund accounting tables, and different person to the unfastened marketplace complaint utilized for lipid gross realisation.

An earlier subsidised speech rate, which was acold little than the unfastened marketplace rate, has present been abandoned. Any excess currency resulting from this is expected to beryllium doled retired to low-income Iranians successful the signifier of electronic coupons that tin beryllium utilized to bargain indispensable items similar food.

For the archetypal time, the fund is drafted successful caller rials arsenic 4 zeros are expected to beryllium removed from the ailing nationalist currency by the clip the fund is operational for adjacent year.

After years of backmost and forth, the parliament successful October approved the authorities program to lop disconnected 4 zeros. The determination is lone cosmetic and volition not assistance with the runaway inflation, but proponents argued it was indispensable aft years of currency devaluation.

Budget spells grim outlook

Several large factors person already been raising alarm implicit however atrocious the economical concern could go adjacent year.

Iranians online reacted poorly to the information that the authorities predicts wages volition beryllium acold outpaced by ostentation and taxation collection. Others were acrophobic that eliminating the subsidised complaint for indispensable goods could cause different terms shock successful the abbreviated term.

Many shared a video of Pezeshkian from past twelvemonth moving for president, erstwhile helium said during a televised interrogation that the stark disparity betwixt wage increases and ostentation is simply a “grave injustice” being done to the Iranian people.

“Unfortunately, truthful agelong arsenic we bash not resoluteness the structural issues, we are making labourers and authorities workers poorer by the time portion those with wealth get bigger and bigger,” Pezeshkian said astatine the time.

“This ostentation is an further taxation connected the mediocre and the disenfranchised.”

Iranian women store successful a section marketplace arsenic the worth of the Iranian rial drops, successful Tehran, Iran, connected December 20, 2025 [Majid Asgaripour/WANA (West Asia News Agency) via Reuters]

But successive governments person failed to destruct fund deficits oregon rein successful banks teetering connected the brink of insolvency, truthful relying connected the cardinal slope to people much wealth to tally the state and, successful turn, exacerbate inflation.

Earlier successful December, the authorities proceeded with expanding the terms headdress of petroleum contempt repeated assurances it had nary plans to that effect this year. The determination has already led to accrued transport costs, which volition extremity up taking ostentation higher.

There are present 4 terms tiers for petroleum, with the cheapest and lowest prime that is disposable to astir Iranians costing up to 50,000 rials per litre (about $1.19) and higher prime imported substance delivered this week astatine 800,000 rials per litre ($19).

Hamid Pourmohammadi, who heads the Plan and Budget Organization of Iran, insisted that the authorities has devised a 20-point program to beryllium unveiled soon that volition trim unit connected the livelihoods of Iran’s 90 cardinal population.

“The authorities is trying to follow an progressive attack to code the economical challenges of the people, businesses and economists, truthful determination is nary cognition of complacency successful these economical conditions,” helium said.