Tehran, Iran – Iran’s currency has been experiencing significant fluctuations, recently reaching a notable low amid ongoing economic challenges, further underscored by the government’s budget proposal for the upcoming year. On Wednesday, the value of the Iranian rial against the US dollar peaked at approximately 1.36 million rials in the open market. However, it showed slight recovery the following day, reflecting the volatile economic landscape.
The sharp decline of the national currency can be attributed to escalating sanctions imposed by the United States and its Western allies, alongside persistent geopolitical tensions in the region. In light of these economic pressures, President Masoud Pezeshkian presented a detailed proposed budget to the predominantly hardline parliament for the forthcoming Iranian calendar year, set to commence in late March. This budget proposal will subsequently undergo review by the 12-member Guardian Council before it is enacted into law.
Despite nominal growth of just over 5 percent from the previous year, inflation remains high at approximately 50 percent. This situation indicates that the government aims to implement a “resistance economy,” focused on managing budget constraints while navigating through challenging economic circumstances. However, the proposed minimum wage increase of merely 20 percent stands in stark contrast to the soaring inflation, leaving many Iranians concerned about their diminishing purchasing power in the coming year.
The budget outlines a substantial 62 percent increase in tax collection, which the authorities hope will gradually lessen dependence on oil revenue amid geopolitical pressures that aim to undermine Iranian exports, primarily directed towards China through a network of shadow fleet vessels.
At the current exchange rate, the budget amounts to around 6 billion, significantly lower than anticipated budgets by regional counterparts, which include nations such as Saudi Arabia and the UAE. The Iranian government has also initiated reforms to its multi-tier exchange rate system, seeking to streamline processes for customs and import valuation.
An important aspect of the upcoming budget is the planned removal of four zeros from the rial, a move that, while mainly symbolic, has been deemed necessary after years of steep currency devaluation. This decision reflects a broader intent to reshape the economic landscape in Iran.
Despite ongoing economic challenges, including rising petroleum prices that have further impacted transport costs and inflation, Hamid Pourmohammadi, head of the Plan and Budget Organization, expressed the government’s commitment to introducing a comprehensive 20-point plan to alleviate the economic burdens faced by Iran’s 90 million population.
In these trying times, the Iranian government is determined to take an active stance in addressing economic hardships, demonstrating resilience in the face of adversity.
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