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Geopolitics

Why Inflation In Iran Is Hitting Even Harder

Inflation is nothing new in Iran. But its staggering rise is pushing millions of Iranians toward abject poverty.

Why Inflation In Iran Is Hitting Even Harder

At the Grand Bazaar in Tehran

Roshanak Astaraki

-Analysis-

As inflation in Iran spikes to record heights, President Ebrahim Raisi and his Economy Minister Ehsan Khanduzi insist the government is working to curb the price hikes wreaking havoc on household budgets. Yet there is very little in Raisi's year-long record to indicate earnestness in getting a grip on inflation or mitigating its impact on the poor. The endemic inflation of the last four decades, and particularly the explosive inflation of the last three years, are forging a frightening picture of daily life for many Iranians.


In April-May this year, consumer prices had risen 52.5% year-on-year, though the annual inflation rate for foodstuffs stood at 81.6% in those weeks. The rates are based on figures given by the Iran Statistics Organization and the Central Bank, which many observers believe are notched down. But even they show an average rate of over 40% for the past three years and over 20% in the past three decades. Per capita earnings meanwhile have fallen while all welfare and consumer indicators are in free-fall.
Separately, Iranians are thought to be paying 15 times as much in taxes this year as in 2011-12. The only thing that has missed the inflationary rocket is wages.

Below poverty line

Every year, the purchasing power of vulnerable groups like pensioners or working-class families buckles under the pressure of inflation as prices leap ahead of stable wages. The government raised state-sector wages by no more than 10% in the Persian year to March 20, 2022. That has pushed millions of state-sector employees and their households below the poverty line.

The family has become one of the most vulnerable of social units in Iran

Four decades of inflationary conditions of varying intensity have had and will have long-term socio-economic and cultural effects. Large sectors of society have ended all spending on leisure, travel, culture, eating out and extra-curricular studies. Currently, many are trying to pay the rent without cutting on food.

Even reducing some of the items in a standard family basket of goods, households are finding it hard to pay rent and eat properly. There have been recurring reports recently of falling demand for basic foods including meat, chicken and dairies. The head of an association of fruit and vegetable retailers recently reported a 25-30% drop in demand for fruit over a week. Fruit was already a luxury in Iran, and as a senior nutritionist at the Health Ministry stated six years ago, 88% of Iranians were not eating enough of them.

Most figures out of Iran will confirm that numerous households are reducing or altering their nutrition to dangerously poor levels, and malnutrition will likely affect the health of future generations.

Iranian President Ebrahim Raisi speaking during a parliament session

Iranian Presidency/ZUMA

What will last

The family has become one of the most vulnerable of social units in Iran. Many people work several shifts to make ends meet, prompting distancing, stress and dismay inside families. Stress can undermine the affection children need. Down the line it can provoke failed studies, misdemeanors or addiction.

The middle class is another victim of the inflationary hurricane, being hit by falling purchasing power and a crisis in their sense of identity and belonging in Iran. This decline has prompted many of its members to move into cheaper residential districts. Perhaps the effects of impoverishment on them are not yet as grave as they have been on the poor: in their case, inflation is hastening such trends as increased criminality, addiction, child labor, child marriages or homelessness.

When people lose hope in the here and now, they will seek a way out

Inflation has also encouraged social exclusion and discouraged voluntary activities and even attention to environmental issues or ethical questions like animal rights.

While in many countries the state meets some very basic needs of the poor such as healthcare and schooling, such rights are now far from assured in Iran. Online schooling during the pandemic, for example, became extremely difficult for families without access to tablets or computers, or in those parts of Iran where Internet access is sketchy.

The Islamic Republic should be afraid

The Iran Statistics Organization estimates that a million Iranian youngsters missed the 2020-21 school year for a range of reasons, and a few thousand more are likely to miss school this year because of growing poverty. Persistent schooling gaps now will only feed economic poverty in coming years, as children will grow up without the skills the job market may require.

When people lose hope in the here and now, they will seek a way out, including by leaving the country. Iran has been losing a vital workforce for some years now.

But much more threatening to the Islamic Republic is the enormous and growing gap between most Iranians and a ruling minority whose corruption and ruthlessness is leading the country toward utter ruin.

There is only so much people can take. In Iran, that pressure may finally push millions of desperate citizens onto the path of ridding themselves of an erratic and hated regime.

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