Bread Prices Jump In Iran As Government Subsidies Stay Flat

Iran's state television has confirmed an increase in 13 provinces in the price of bread, the main staple in Iranians’ diet, after weeks of contradictory statements. 

In the past few weeks various government officials had repeatedly denied media reports about the government’s intention to increase the price of bread, supposedly because following subsidy reforms in May 2022, former Minister of Economy Ehsan Khandouzi had stated that an increase in the price of bread was “the President’s redline” and other officials had repeated it.

The increase in the price of bread has now officially been announced in several provinces including Khorasan-e Razavi (Razavi Khorasan), South Khorasan, Markazi (Central), Qazvin and Fars. 

Coming months after large anti-government protests, the higher bread prices carry the danger of renewed unrest.

Last week Iranian media reported an increase of around 40 percent in the price of bread, without any prior announcement, in the northeastern province of Khorasan-e Razavi, followed by several other provinces. 

According to Ahmadreza Keshtgar, Chairman of Bakers’ Union in Mashhad, capital of Khorasan-e Razavi, the union had proposed an increase of 110 to 115 percent but the province governor’s office did not agree to raise the prices more than 40 percent. 

Reza Ramezani, deputy governor-general of Mashhad, told Khorasan newspaper on July 26 that the plan to increase the price of bread had been in the pipeline for a while because bakers are paying higher for labor, rents, tax, and utilities. 

Bakers say despite the lower cost of subsidized flour, other production costs (labor, other ingredients including yeast and oil) have increased so much in the past year and their sales have dropped so that they are still not able to make a profit.

Earlier in June the Bakers’ Union had revealed that subsidized flour allocations to some bakeries had dropped by more than half their quota. 

The traditional semi-flat bread called barbari, for instance, the unbaked loaf of which is supposed to weigh 400 grams, sold at 8,500 rials ($0.17) before the increase but has now risen to 12,000 rials. ($0.24). Although this might seem cheap by world standards, the average salary in Iran is about $200 a month and people’s purchasing power is severely curtailed after the currency rial fell to historic lows last year.

The subsidy was introduced in April 2018 by the government of President Hassan Rouhani when former US president Donald Trump signaled his intention to withdraw from the Obama-era nuclear agreement with Iran known as the Joint Comprehensive Plan of Action (JCPOA), and Iran’s national currency began to nosedive. Prices for imported goods skyrocketed and the government decided to provide cheap dollars to importers of essential goods including flour to keep prices low. 

On May 1, 2022, the parliament voted to allow the government to scrape an annual $10-14 billion subsidy for essential food and medicine despite warnings of higher inflation, which already stood at around 40 percent, and hardship for the most vulnerable. This led to a ten-fold increase in the price of flour. 

The government of President Ebrahim Raisi then introduced a “smart plan” to continue the bread subsidy and issued digital cards that had to be used at the time of purchase, arguing that the plan would prevent the smuggling of subsidized flour and bread to neighboring countries where they sold at much higher prices. 

Bakers complain that the ration card system is causing them many problems including disruption of trade when the internet is down. They also say the government does not always reimburse them for its share of the price of bread purchased by customers (subsidy) on time. 

The massive jump in the price of flour after removal of its subsidies has affected the price of a wide range of other goods including pasta, biscuits, and cakes. Meanwhile, non-traditional loaf breads are available at in other bakeries at unsubsidized prices.