For four consecutive years, inflation in Iran has been over 40 percent, and for five decades, it has been in the double digits. This is the picture that awaits the Iranian economy for the remainder of 2023, escalating gradually and evolving into hyperinflation.
Iranian regime supreme leader Ali Khamenei had dedicated Iran’s new calendar year (from March 2023 to March 2024) as the “year of controlling inflation”. However, during the first five weeks of Iranian calendar year the country’s point-to-point inflation rate has surged to its highest level of 63.9 percent.
Inflation, or the increase in the general level of prices, is an indicator that directly tied to the well-being of a country’s population and economic activities. It is an influential index that all members of a society are directly connected to, and an increase in it implies uncertainty about the future.
Iranian regime President Ebrahim Raisi began his tenure in August 2021 promising to fight inflation. Nearly two years into his presidency, inflation has remained an unsolvable problem. The unprecedented price hikes witnessed across in Iran during this period have forced Raisi to change his Central Bank chief in response to mounting public pressure.
Are we facing hyperinflation in Iran?
Economists believe that inflation in Iran has turned into “chronic inflation.” In such circumstances, the most likely predictable scenario is to maintain the status quo, keeping inflation at around 40 to 50 percent. In this case, it is predicted that the inflation rate will escalate at two to three times the trend witnessed in the past 50 years.
Turkey, Peru, Israel, Brazil, Belarus, and Angola are countries that have experienced similar circumstances. Such conditions cannot continue for a long period and will result in either economic reforms or result in the collapse of the economy and national currency.
However, if no change occurs in the coming months, all signs indicate that Iran is rapidly moving towards “hyperinflation.”
Starting from 2018, there has been a shift in Iran’s inflation pattern , transforming from a relatively high to a progressively increasing rate, averaging at 34 percent over this period. Notably, Iran’s inflation surpassed 47 percent in the first 11 months of 2022.
In countries like Sudan (2020), Lebanon (2021), Venezuela (2015), Zimbabwe (2019), Congo (1991), Belarus (1993), and other countries that have experienced hyperinflation, the cycle has been an increasing trend that suddenly skyrocketed to over 100 percent within a year or two, despite registering long-term inflation rates of below 20 percent.
The exchange rate of the dollar in Iran, which had peaked to 600,000 rials in February, sharply declined following the agreement between Saudi Arabia and the mullahs’ regime to resume diplomatic ties in the final days of the Persian year (mid-March). The U.S. dollar dropped to below 430,000 rials, as a result. However, with the beginning of the Iranian new year, the dollar rate rose again and was selling at 530,000 rials by April 27.
Can the regime control inflation?
With severe monetary base growth, significant budget deficits, severe rise in dollar exchange rates, and the government resorting to printing money to cover its expenses, Iran is facing a significant dilemma to due to high inflation, which could lead to hyperinflation without any positive measures in the economy.
All signs indicate that the government is busy printing money and making up for its budget deficit by borrowing heavily from banks and forcing them to borrow from the central bank.
According to official figures, Iran’s rial today is 55 percent weaker than a year ago and 94 percent weaker than a decade ago. Furthermore, nationwide protests since September 2022 after the killing of Mahsa Amini have intensified the decline in Iran’s exchange rate.
The regime believes it can create “resistance economy” that can withstand long-term sanctions and can rely on China and Russia to help it stay on its feet.
The official inflation rate announced by Iran’s statistics center in February was 46.5 percent in February. The real figure is expected to be much higher. The fact is that the Iranian people have for years seen the regime’s officials provide nothing but hollow promises. They will not be deceived by the regime, including Khamenei’s inner circle.
The result of these economic calamities directly impact people’s livelihoods through increasing poverty and skyrocketing prices. This has also resulted in grave concerns among the regime’s internal factions.
What concerns the ruling mullahs is not people’s poverty but growing dissatisfaction and an end to the Iranian people’s tolerance.
