As the curtain lifts on the inflation statistics for October, an unsettling reality confronts observers: Iran’s point-to-point inflation remains stubbornly elevated at approximately 31.6%, a stark reminder of economic turmoil as it looms over the same period last year. This rate significantly surpasses the government’s ambitious 2024 target of 25%, underscoring the persistent hurdles that thwart official aspirations for effective inflation control.
Earlier in the year, April emerged as a glimmer of hope, with inflation dipping to 31% — a low not seen in 45 months. At that moment, optimism flourished around the government’s capability to edge inflation down towards the 25% threshold. Yet, contemporary figures reveal a disheartening resurgence, indicating a concerning upward trajectory since those initial promising metrics.
While monthly inflation figures exhibited a downward trend since June, an unexpected spike in October has injected renewed complexity into the economic landscape for officials as they navigate the latter half of the year. This sudden inflationary upturn coincides ominously with parliamentary discussions of the 2025 budget, creating a challenging environment for implementing a promised 20% salary increase for employees — a clear disjunction between governmental plans and the harsh realities faced by the populace.
Further straining the situation is a relentless budget deficit coupled with an escalating exchange rate, both of which cast long shadows over the government’s professed ability to tame inflation in the forthcoming year. As the administration grapples with the ambitious objectives outlined in its 7th Development Plan — a remarkable 8% economic growth and the lofty aspiration of steering inflation into single digits — these targets increasingly appear to drift beyond the realm of attainability, particularly against the backdrop of present challenges.
The forecast for the 2025 budget is alarming, with a potential deficit soaring to a staggering 800 trillion tomans. This perilous financial state is likely to compel the government to resort to tactics such as bond sales and borrowing from the central bank—strategies that risk further inflating the economic fire. Experts are raising red flags as well, projecting that the bond issuance, already skyrocketing by 175%, will demand even higher interest rates to entice funding, placing additional strain on the capital markets.
Among the most contentious proposals in the forthcoming budget is the transition to a floating exchange rate for essential commodities, a marked deviation from the existing rate of 31,000 tomans per euro. Predictions paint a grim picture, suggesting that this shift might propel the exchange rates beyond the 50,000 tomans mark. Such a surge would inevitably reverberate through the economy, driving up prices for indispensable goods and placing an immeasurable burden on the most vulnerable sections of society.
On the revenue side, while the government outlines a hopeful 41% surge in oil revenues, the looming 20% discrepancy between projected revenue growth and the anticipated rise in exchange rates hints at an impending decline in real oil earnings for the upcoming fiscal year. To compound these challenges, the administration’s substantial borrowing plan, estimated at a whopping 10 billion euros from the National Development Fund, looms ominously on the horizon, poised to further escalate inflationary pressures.
The budget blueprint also stipulates an aggressive 40% increase in tax revenues. This ambitious move threatens to suffocate the business and manufacturing arenas if not accompanied by corresponding tax relief measures. Such a higher tax burden runs the risk of overshadowing potential improvements in the business environment, possibly precipitating declines in production and increased job losses.
As government spending reaches unprecedented levels — with projections soaring from 2.8 trillion tomans to 6.4 trillion tomans — it becomes apparent that authorities remain steadfastly resistant to curbing expenditures or trimming their operational reach. Instead of addressing the budgetary shortfall through necessary structural reforms or economy-wide cost reductions, the 2025 budget reflects a marked escalation in public spending. Such policies threaten to deepen inflationary pressures and foster economic stagnation. Over the past three years, inflation has averaged a staggering 45%, raising doubts about the feasibility of reaching the single-digit inflation target outlined in the 7th Development Plan. As a result, Iranian households can brace themselves for another year fraught with economic hardship.
Looking ahead, predictions paint a bleak portrayal of Iran’s economic future — marked by persistent inflation, ongoing stagnation in production, and instability in financial markets. The 2025 budget encapsulates a troubling tapestry of challenges, with burgeoning government spending and its attendant pressures on low-income demographics presenting substantial barriers to realizing the nation’s economic aspirations. Unless profound reforms are embraced, Iran’s economy faces an uphill battle, with growing obstacles undermining both developmental efforts and the quest for inflation amelioration.
