Iran’s Economic Crisis Spirals as Rial Devalues and Inflation Soars

On Saturday, December 28, the exchange rate of the US dollar in Iran’s free market surged by 800 tomans, reaching 81,700 tomans.

Iran’s currency woes deepened on Saturday as the exchange rate of the US dollar in the free market surged by 800 tomans, reaching 81,700 tomans. Meanwhile, the British pound and the euro surpassed 103,000 tomans and 85,000 tomans, respectively.

This significant depreciation of the Iranian rial comes amid a sharp increase in currency prices over the past year: the dollar has jumped by 5% in the past week, 17% in the past month, and an alarming 63% over the past year. As in previous instances, this rapid devaluation is expected to ripple through the economy, driving up the prices of goods and services.

Inflation and Wages: A Growing Disparity

Despite the acknowledgment by the head of Iran’s Central Bank of a 52% inflation rate in 2024, the government’s proposed 2025 budget includes only a 20% increase in workers’ wages.

This disparity highlights the mounting economic challenges faced by ordinary Iranians. The soaring currency exchange rates have been accompanied by record-breaking increases in gold prices.

On the same Saturday, the price of various gold coins in Iran rose by 1.5% to 3.5%. For example, the Emami coin saw a 2% increase from Thursday, reaching 57,300,000 tomans, while the Bahar Azadi coin rose by over 1.5% in just 24 hours to 54,540,000 tomans. Over the past year, the price of the Bahar Azadi coin has surged by more than 109%.

Broader Currency Fluctuations

Other foreign currencies have also experienced sharp increases against the rial. The Swiss franc reached 90,500 tomans, the Canadian dollar 56,650 tomans, the Turkish lira 2,400 tomans, the UAE dirham 22,300 tomans, and the Chinese yuan exceeded 11,200 tomans.

Over the last six months, Iran’s Central Bank has raised the NIMA rate—the official Foreign Exchange Transactions System rate—by more than 60%. This policy shift has significantly increased the cost of imported goods, further straining household budgets.

Official Responses and Inadequate Measures

The government’s inability to stabilize the rial has exacerbated Iran’s economic crisis. On December 23, during a meeting of the Economic Committee of the Parliament, Minister of Economy Abdolnaser Hemmati acknowledged the limitations of government intervention, stating, “A lot of things cannot be done by force, and a significant percentage of non-oil export currency does not return.”

Given the current economic conditions, a proposed 20% salary increase for next year—which may rise to 30% with parliamentary intervention—is unlikely to offset the impact of a 63% increase in the dollar rate and 52% inflation. This imbalance will likely exacerbate poverty levels across Iranian society.

Compounding Crises

The economic turmoil is compounded by a series of overlapping crises. Frequent power outages, factory closures, and intensifying air pollution—which has reached toxic levels—have created additional burdens.

Public goods and services such as education, healthcare, and sports have become increasingly expensive, while gas shortages and soaring housing rents add to the pressure.

Social issues, including rising crime rates and a 100% increase in street robberies over the past year, further illustrate the deteriorating living conditions. Environmental degradation and the regime’s costly support for proxy forces and regional conflicts continue to drain the nation’s wealth, leaving society under ever-mounting strain.

“Natural” Currency Devaluation?

In a stark illustration of the government’s stance, Jafar Ghaderi, the first vice-chairman of the Economic Commission in Parliament, described the rising prices of currency and basic goods as “natural.” Speaking last Thursday, he asserted that no one should expect a decrease in the dollar’s value.

Conclusion

Iran’s spiraling economic crisis highlights systemic failures in managing inflation, stabilizing the currency, and addressing public needs.

As inflation and poverty rise hand in hand, the Iranian government’s limited and inconsistent responses are leaving millions of citizens to bear the brunt of these challenges.

Without comprehensive changes and effective economic policies, the situation is likely to worsen, deepening the plight of Iranian society.