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

Iran’s government budget reveals tough road ahead as currency hits new low Prices of basic items like food are only expected to grow over the coming months as Iranians get poorer. Tehran, Iran - Iran’s currency has been registering new lows amid ongoing economic turmoil that is also reflected in a planned budget for next year that effectively shrinks public spending. Each United States dollar was priced at about 1.36 million rials in the open market on Wednesday in Tehran, its highest rate ever, before the Iranian currency slightly regained ground on Thursday. Recommended Stories list of 3 items list 1 of 3 Pope Leo laments suffering of Gaza Palestinians in first Christmas sermon list 2 of 3 Turkiye arrests 115 ISIL suspects it says planned holiday attacks list 3 of 3 Israel says member of Iran’s IRGC among several killed in Lebanon strikes The embattled national currency has been rapidly declining over recent weeks as the US and its Western allies pile on their sanctions and diplomatic pressure, and the threat of another war with Israel lingers. President Masoud Pezeshkian this week sent his administration’s finalised proposed budget to the hardline-dominated parliament for the upcoming Iranian calendar year, which starts in late March. The budget will then have to be greenlit by the 12-member Guardian Council before being ratified into law in the coming weeks. The presented budget nominally grew by just over 5 percent compared with last year, but inflation currently stands at about 50 percent - indicating that the government envisions lower spending while managing a so-called “resistance economy” as it faces a massive budget crunch yet again. But minimum wages are to be raised far below the inflation rate, too, at only 20 percent, meaning that Iranians are once more guaranteed to have far less spending power next year as the embattled national currency sinks. At the same time, the budget says the government sees taxes rising by a massive 62 percent next year, as authorities try to gradually decrease dependence on oil revenues amid US efforts to drive down Iranian exports, which are carried by a shadow fleet of ships mostly to China . At the current exchange rate, the whole budget is worth about $106bn, several times lower than the projected 2026 budgets of regional players like Turkiye, Saudi Arabia and Israel. Iran’s rent-distributing multi-tier exchange rate system is still at play, with the government proposing allocating a rate for customs duties, import valuation and budget accounting tables, and another closer to the open market rate used for oil revenue realisation. An earlier subsidised exchange rate, which was far lower than the open market rate, has now been abandoned. Any excess cash resulting from this is expected to be doled out to low-income Iranians in the form of electronic coupons that can be used to buy essential items like food. For the first time, the budget is drafted in new rials as four zeros are expected to be removed from the ailing national currency...

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