Food Prices Soar In Iran Amid Sanctions, Economic Crisis
Food prices have jumped 61 percent in Iran in the past 12 months compared with the previous 12-month period, the latest figures published on Saturday show.
Food prices have jumped 61 percent in Iran in the past 12 months compared with the previous 12-month period, the latest figures published on Saturday show.
The Statistical Center of Iran (SCI), the only government outfit publishing regular inflation and other economic figures, said this was a record inflation rate in Iran.
While overall inflation is more than 45 percent, food prices have soared higher leading to recent local media references to “hidden hunger” among Iranians.
Prices for basic food items, such as cooking oil jumped by 94 percent and dairy products by 71 percent.
Us sanctions since 2018 have deprived the country of oil export revenues forcing a defiant government to print money, fueling inflation and effectively devaluing the national currency. The rial has dropped almost ninefold since late 2017.
Governmental bodies have usually under-reported inflation and unemployment and based on media reports on prices, the real rate of inflation could be much higher than official figures. Earlier this year there were reports of triple-digit rise in food prices.
There are increasing calls from former officials and influential personalities in Iran for the government to act and try to reach an agreement with the United States over Iran’s nuclear program.
Voices outside the government have emerged as several reports in the Iranian media say as the country faces its worst economic crisis ever, a large part of the Iranian population cannot make ends meet. Inflation is at least 50 percent and food prices have claimed even faster.
Former President Mahmoud Ahmadinejad said in an interview with Al-An TV in the United Arab Emirates during his visit to that country last week, "both Iran and the United States have sustained losses during the past 40 years" because of the impasse in their relations, adding that "it is time now for Tehran and Washington to start a dialogue in this direction based on a fair framework."
Speaking also about the impasse in talks to revive the 2015 nuclear agreement, Ahmadinejad said that "the JCPOA was initially intended to solve existing problems between the two countries, but after several years not only it failed to achieve that, but it has led to more complication." Ahmadinejad acknowledged that "This means the agreement was not successful because it was not fair."
"Six countries oppose Iran's nuclear activities and Iran has been holding talks with all of those six countries to reach a settlement. This means Iran will always be the loser because it has one vote against six votes by those countries," Ahmadinejad explained.
"So, what are Iran and those countries going to return to? I do not think any one of those seven parties would want to return to that agreement. The US side might want to return to the JCPOA, but what about the Iranian side," he asked.
However, Ahmadinejad concluded that "the nuclear issue is only a pretext. The differences between Iran and the United States are deeper than that. They have a bigger problem, which the JCPOA failed to solve. Wise men from both sides should sit together and solve that problem."
Meanwhile, Grand Ayatollah Lotfollah Safi Golpayegani, a former Guardian Council member who is said to be 104 years old and has at times offered ideas different from Supreme Leader Ali Khamenei, has called for an end to Iran's isolation in the world and said in a meeting with Majles Speaker Mohammad Bagher Ghalibaf on Frida: "I am seriously concerned about the country's economic situation and the people's problems."
The Grand Ayatollah suggested: "We should maintain relations with all the countries in the world. It is not good to be sulking with many other countries. In order to restore the rights of the people and put an end to the current situation which Iranians do not deserve, we should maintain relations with the world."
Meanwhile former Lawmaker and one of the leaders of Iran's reform camp, Mohammad Reza Khabbaz has said in a commentary published by reformist daily Arman on Thursday that "the people of Iran are waiting for a brave decision to be made by the government in order to solve difficulties people face."
Explaining the economic hardships Iranians are experiencing, Khabbaz said that although the problem is serious, it can still be solved with a surgical operation and the sooner this surgery is done, the less painful it will be. But if remained untreated, more serious and dangerous consequences will follow.
Khabbaz was in fact saying in his cryptic language that if the sanctions are not lifted and the country's economic problems continue to worsen hungry people will take to the streets and endanger the regime's existence. This is what several sociologists and economists have predicted throughout the year.
He said the government's problem is that it is consisting of a bunch of like-minded individuals, and everyone is supporting the government's approach. During the past week, many conservatives have criticized the Raisi Administration's inaction and indecision about restarting the negotiations for reviving the JCPOA.
Khabbaz suggested that the Raisi administration has only two options: waiting and seeing the gradual collapse of the country's economy or surrendering to a surgical operation by experts.
Reports published last week in Iran, including one in the proreform Fararu website said a typical government employee spends one-third of his or her salary to buy for a family's requirements for only a few days. Another report by Nemat Ahmadi, a prominent lawyer in Tehran, which was published in Arman on Thursday, listed the price of some staples and warned that Iran is headed toward a situation that happened during the 1918 famine which killed millions of Iranians.
An exchange rate of 42,000 rials to the dollar is applied to imports of ‘essential’ commodities while the dollar trades in the open market at over 270,000 rials. The hugely discounted dollar for importers of essential goods was meant to keep down the cost of the commodities facing consumers.
In April 2018, as the United States readied ‘maximum pressure’ sanctions and as the rial fell to a then record market low of around 60,000 against the dollar, the government of President Hassan Rouhani introduced a rate of 42,000 rials to the dollar to facilitate imports of essential goods.
The government's foreign exchange subsidy not only failed to prevent the further fall of the rial or stabilize the market but also it soon became a new problem as allegations of corruption in the distribution of the cheaper dollar began to haunt the government in a matter of months. Much of the valuable was being spent on importing luxury items, from cars to household appliances while subsidized food, medicine, and animal feed was being smuggled out of the country.
According to the Tasnim news agency, Economy Minister Ehsan Khandouzi this week said the government's economic team was considering allocating the resources currently channeled into supporting essential imports into direct payments to citizens.
Such a move could bolster the ability of recipients to pay higher prices, but economists have argued in recent days that price inflation will accelerate if cheap dollars stop, and the cash handouts would never make up the difference.
That would carry a serious risk of political unrest for the government, as events in November 2019 showed. A sudden hike in gasoline prices led to spontaneous widespread protests. Security forces used military weapons to fire on unarmed protesters, killing hundreds in three days.
The government of President Ebrahim Raisi faces a budget deficit of around $12 billion. A recent report from the Planning and Budget Organizationput Iran’s debt at 30 percent of GDP: this compares to 40 percent in Turkey, 67 percent in Egypt, 117 percent in the US, and 171 percent in Lebanon, but is onerous where denominated in dollars.
Due to demand on foreign exchange − and with the rial at a market rate of 140,000 against the dollar − a meeting of the president with the heads of parliament and judiciary in April 2019 fixed the subsidized rate at 42,000 and limited its allocation to imports such as food and medicine.
The Central Bank, accordingly, constrained the allocation. By July 2021, reports emerged that 1.3 million metric tons of ‘essential’ goods in Iranian ports could not be unloaded because importers lacked dollars to pay foreign vendors.
Sugar was dropped from the list of eligible items in November 2020, while cooking oil remained. Since late March the government has allocated at least $6.9 billion for importing ‘essential’ goods at the set rate, including $1.5 billion for cooking oil.
Nonetheless the price of cooking oil has almost doubled in a year, given rising inflation put at close to 50 percent annually by the Statistical Center of Iran. The IMF projects consumer price inflation of 39 percent in 2021, and 28 percent in 2022.
