Inflation Tops 50% As Iran Starts Offering Gold On Stock Market
Despite haphazard state measures such as injecting dollars into the currency market and selling gold on the stock market, inflation is soaring and the rial maintains a downward trend.
Despite haphazard state measures such as injecting dollars into the currency market and selling gold on the stock market, inflation is soaring and the rial maintains a downward trend.
The point-to-point inflation rate reported by the Statistical Center of Iran (SCI) for the past Iranian month, which ended on January 20, has surpassed 50 percent, with food inflation hitting an average of over 70 percent.
The SCI put overall inflation at 51 percent, taking into account 12 groups of goods and services. The highest jump was reported in the hotel and restaurant sector with 78.5 percent, followed by food.
The SCI announced food inflation to be over 70 percent, considering the rise in prices of bread and cereals, red meat, dairy products, fruits, etc. The inflation for edible oils and fats was about 248 percent in comparison with the corresponding period of the previous year. Most of the rise was due to the government’s elimination of subsidies for essential goods – factored in the supply chain in the form of cheap dollars for importers. The lowest inflation in the group of food items was reported for tea, coffee, cocoa, soft drinks and fruit juice with an average of 32 percent.
Medicines and healthcare services recorded a 54-percent increase followed by price increases for transportation and clothing with 46.9 and 45.7, respectively.
The figures indicated a slower rise in prices as the inflation of food items even reached 100 percent in some provinces in previous months. Most price increases happened since early May when the government scrapped a food import subsidy to save around $15 billion annually. The move immediately triggered a massive rise in prices for basic food staples, such as bread, dairy products, cooking oil and meat. Although the government has repeatedly said its oil exports are steadily increasing despite sanctions by the United States, economic conditions keep deteriorating, with Iran's battered currency, the rial, hitting historic lows in recent months.
The government has taken a slew of measures in the past months to curb inflation and control the freefall of the rial. It replaced the governor of the central bank about a month ago, and has kept injecting dollars into the market to balance out demand. On Tuesday, it started offering gold coins on the stock market and also launched a system for nominally fixed exchange rates for its nosediving currency, which has lost at least 50 percent of its value since mid-2021.
On Tuesday, one dollar was exchanged for over 440,000 rials to the US dollar, bouncing back from a low of 450,000 in the past couple of days.
The government started selling gold on the stock market in the form of securities. As per the plan, people can buy up to five gold coins weighing about two grams each (called quarter gold coins in Iran as a full gold coin is about eight grams) at current prices, but they only receive a document for their purchase and will have to wait until the government announces the date when they can receive their coins. People tend to rush for such governmental schemes because by the time they get their coins, the price will be higher as the rial falls, and they can gain a little profit. This way the government gets large amounts of money and only gives people some certificates for their purchase. The government plans to sell 450,000 of these two-gram coins on the stock market in the next 10 days. This will amount to nearly a ton of gold.
Moreover, this week, the government pumped $305 million into the currency market over two days, after rial fell to a historic low of 450,000 against the US dollar.
Earlier in the week, the parliament approved the outlines of the budget bill for the next Iranian year – starting March 21 -- without considering its unrealistic assumptions. The deficit in the current budget that the government admits is about 4,760 trillion rials – more than ten billion dollars. But the real deficit will be perhaps twice as much, with rosy estimates of oil sales and staggering tax collection.
Reza Nili, the editor of Nemayandegan website, which covers news and analysis about the Iranian parliament (Majles) says the prediction which is based on the latest polls in Tehran indicates that such a low-turnout election will produce an "undesirable" parliament.
The turnout in the latest round of parliamentary elections in 2020 was just over 26 percent in Tehran, which was the lowest ever. However, the government announced the general turnout as over 42 percent.
Reports in the Iranian media in recent weeks said that most lawmakers are currently either working hard to garner support for the next election in early 2024 or trying to appease the hardliner government to give them a job in case they are not re-elected.
According to semi-official news agency ISNA, the next parliamentary election in Iran is likely to be overshadowed by the ongoing protests and the uprising that started in September following the death in custody of the young woman Mahsa Amini.
ISNA added that Iran's reformist parties whose candidates were barred from taking part in the previous election by the Guardian Council have not started any campaigning or planning for the next election.
Hardliners, having the support of Supreme Leader Ali Khamenei, used the Guardian Council that vets candidates to disqualify the great majority of reformists in 2020. They are now probably looking for some kind of assurance from before they begin to think of taking part in the election. This comes while less than 11 months remain before registration for the next election starts.
It appears that the turbulent months of late summer and autumn and the protests that still continue in the middle of the winter have left no motivation for aspiring candidates to run for the Majles. This could be the first signs to indicate that even regime insiders have their doubts about the regime's legitimacy in the eyes of voters.
According to ISNA, at least part of the Iranian society has still not received a definitive response from the government to its demands. Furthermore, apart from the social and cultural upheaval, concerns about the economy also have their impact as the economic crisis in Iran has impoverished tens of millions of people.
In the meantime, so-called reformist and moderate figures who were barred from taking part in previous election, attribute the country's problems, including the recent protests to the takeover of the entire government by conservatives. There is very little indication that hardliners running the country, particularly Supreme Leader Ali Khamenei who has the final say about everything in Iran, have changed their minds about allowing reformists to run.
It appears that the disillusionment about the election process in Iran is not limited to reformists. Some Conservatives such as former foreign minister Manouchehr Mottaki said his peers will wait until the end of the current Iranian year in late March to make their decision about taking part in the election.
Former interior minister Mostafa Pourmohammadi, the secretary of the right-wing Combatant Clerics Association also said that his group needs assurance from the government before deciding to take part. He pointed out that the regime's legitimacy will increase only if everyone is allowed to run for the parliament.
On Sunday, the Iranian government set March 1, 2024 as the election date, but even the Interior Ministry officials did not look so upbeat about the announcement. One could see in their faces that they look at an unpredictable future when they may not be in their post if nationwide protests gain momentum once again.
Criticizing the insistence of hard-liners on hijab, Azar Mansouri, the female leader of reformist Unity of Nation Party in Iran has argued that the reason why Iranian women burned their headscarves during the recent protests is that the government tried to impose a certain dress code on them in the name of religion.
She said in an article in Etemad newspaper that those who made this mistake did not understand that Islam came to give dignity to all human beings regardless of their gender. "What you are doing is like cutting off the branch you are sitting on," Mansouri told Iranian officials.
Mansouri said people remember viral videos before the protests that started in mid-September, in which a woman was begging the morality police not to arrest her ailing daughter, or many other videos that showed the police's brutality while arresting women for not fully respecting the dress code the government imposed on the people. "Mahsa Amini's death in custody flared up a fire that was under the ashes," Mansouri said in a statement that was identical with what centrist commentator Sadeq Zibakalam had said the previous day.
Mansouri quoted Iranian scholars as saying that "The Woman, Life, Freedom movement started as a result of accumulated dissatisfactions and the widening divides between the government and the Iranian society. She warned that the uprising could still re-emerge.
The politician expressed hope that the government will adopt a realistic policy about how to deal with the people and will start serious legal and structural reforms. However, she warned that what people hear from official podiums erodes any hope in reforms. She pointed out the arrest of Iranian artists for removing their hijab and heavy sentences for them, as well as the killing of many young men and women during the protests as an indication that reforms are unlikely in Iran.
Opposition to the government's heavy-handed approach to enforcing hijab and punishing detained protesters has been on the rise during the past days even by some Muslim clerics. Mohammad Ashrafi-Esfahani has said that "Executions carried out following recent protests are not based on sound legal foundations." He also pointed out that "many top clerics are silent about it because they think no one in the government will care for their attestations."
However, Ashrafi-Esfahani stopped short of saying that many top clerics fear retribution by the government if they speak against the hardliners who control the government and the Judiciary system and are supported by Supreme Leader Ali Khamenei. Nonetheless, the cleric said: "It might help if the leader in a bid to calm the situation tells the Judiciary to deal with prisoners compassionately. This will also be a good publicity for the Islamic Republic."
In her article in Etemad, Ms. Mansouri observed that Iranian women have expressed their opposition to the dress code imposed by the government all along in the past four decades. They have also objected to discrimination against women under the Islamic Republic. But nobody paid any attention to their grievances. She argued that there were no serious confrontations between women and the government until hardliners boldly introduced the morality police.
In the meantime, she said, a government-imposed glass ceiling prevented Iranian women's access to equal rights with men in the areas of education and employment. She concluded that it was this unfair treatment of women and ignoring their rights that triggered their revolt in September and what is now known as the ‘Woman, Life, Freedom’ movement.
President Ebrahim Raisi Sunday defended the bill at the parliament by a rhetorical statement, "The strategy of the enemy is to create despair, while the strategy of the government and the parliament should be to create hope in the hearts of the people." The deficit in the current budget that the government admits is about 4,760 trillion rials – more than ten billion dollars. But the real deficit will be perhaps twice as much, with rosy estimates of oil sales and staggering tax collection.
As the bill was being approved, the Iranian currency rial hit a new historic low, dropping to 455,000 against the US dollar. But that did not deter Raisi from claiming that Iran is witnessing “a very bright future,” citing data supposedly indicating that the country’s economy grew in the past year.
He claimed that "this year the country is witnessing an economic growth of four percent," adding that "a million jobs have been created in the country." When he presented the outlines of the budget, he had claimed that economic growth in this budget would be eight percent.
According to an International Monetary Fund report, economic growth will decrease from four percent in the previous Iranian year to three percent in the current year and two percent in the next year. That is still an estimate based on figures mainly supplied by the Iranian government.
Meanwhile, Gholamhossein Shafei, the head of Iran's Chamber of Commerce, said last year that the country's economic growth has been zero in the past 10 years.
The budget bill that was submitted to parliament more than a month late, places its hope on exporting 1.4 million barrels of oil per day, a lofty goal given that US sanctions are in place and Tehran is exporting less than a million barrels under current conditions. The budget also estimates that each barrel of oil can be sold at $85, while that is the highest price in global market, but Iran has to give steep discounts to ship illicit cargoes to its main buyer, China.
The total tax revenues planned in the draft budget will surpass $20 billion based on the current rate of exchange. In Iranian currency, however, this is a staggering 8.3 quadrillion rials – that is with 15 zeros.
Despite the huge tax bill for the people, the government budget will still have a 50-percent deficit, due to a chaotic downturn in the economy mainly triggered by US sanctions on its oil exports and international banking.
The 59-percent jump in planned tax collection means that taxpayers have to pay at least 10 percent more than the estimated 50-percent annual inflation rate.
The Raisi administration started with a rate of exchange for US dollars of 250,000 rials which has so far risen to over 450,000 rials.
Inflation in the country has soared to over 50%, the highest level in decades. Youth unemployment remains high with over 50% of Iranians being pushed below the poverty line, according to reports by Iran's Statistical Center.
The Iranian currency rial has lost its value by more than elevenfold in five years, making imports of food and other essential necessities equally expensive for consumers.