Iranians’ Purchasing Power Diminishing With Inflation At Peak

Iran's Statistical Center has reported an inflation rate of 46 percent, indicating no significant change despite rise in oil sales and the release of frozen assets.

According to the latest report from ISC, the point-to-point inflation rate is approximately 40 percent, signifying that Iranian households now spend 40 percent more on purchasing an "identical set of goods and services" compared to September 2022.

In the absence of credible data from the Central Bank of Iran regarding inflation rates, Iran's Statistical Center has become the primary official entity for announcing these figures. Government officials and, at times, the central bank tend to announce lower inflation figures prices for consumer goods. The central bank, along with the Ministry of the Economy, ceased issuing regular economic data in 2019 when US sanctions that pushed an already struggling economy into a deep recession.

Although Iran's Statistics Center is administered and funded by the government and operates under the umbrella of Planning and Budget Organization, it has maintained a veneer of credibility as one of the very scarce sources of data – both economic and social. However, it has recently faced pressure from the regime to release figures in line with the government's propaganda. In July, President Ebrahim Raisi sacked the head of Iran's Statistics Center.

Despite the regime's claims of increased crude oil sales and the positive impact of releasing Iran's revenues from Iraq and South Korea, which were blocked under US sanctions, economic hardships continue to pressure Iranians. The purchasing power of the average household in Iran has significantly decreased in recent years, with the highest price hikes affecting food items. Meat, once the primary source of protein for wage earners in Iran, was initially replaced by chicken, and more recently by eggs. 

Approximately a year ago, Iran's rial was trading at around 300,000 per US dollar, but in early May, it dropped to as low as 550,000. Currently, it stands above 490,000. This drastic devaluation of the rial illustrates the severity of inflation in Iran. In July, a lawmaker stated that the annual inflation rate was 120 percent, contradicting the 60 or 70 percent figures cited by various politicians and academics. According to World Bank figures from June, Iran's food inflation rate stood at 78 percent.

The head of Tehran's Supermarkets Union said last week that "people's purchasing power has declined by more than 50% compared to the same period last year, disrupting the supply chain in the market." Davoud Fekouri had to refute his earlier claims in an interview with the state news agency IRNA. In his Monday interview, he was apparently forced to say that supermarket sales have decreased insignificantly and claimed that “it was primarily due to rising prices of certain food items, such as pasta, dairy products, tomato paste, canned fish, and others." 

According to data by SCI, over a 10-year period from 2011 to 2021, per capita consumption of rice and red meat decreased by 20.5 percent and 54 percent, respectively. Moreover, per capita consumption of milk and dairy products dropped by 13.4 percent, and per capita consumption of fish and shrimp halved. 

Lawmaker Abbas Moghtadaei Khourasgani claimed on Monday that US measures such as sanctions and freezing Iranian funds abroad have “failed miserably,” and people will feel the positive impact of the government’s policies in the near future. “Unfreezing Iran’s assets is among the very positive endeavors of the current administration that will undoubtedly have a positive impact on the people's well-being,” he said, adding that the released funds will help control the market and the devaluation of rial. In the past few days, rial’s exchange rate has fallen against the dollar, albeit insignificantly.

However, the release of Iran’s money from Iraqi banks -- that apparently started in June -- and its $6 billion in oil revenues from South Korea earlier this month as well as a rise in oil exports have so far failed to make a dent in the adversity people face.