Iran’s audit watchdog pushed back on President Masoud Pezeshkian’s comments about fuel costs, warning officials against providing inaccurate data and saying gasoline imports this year were far lower than figures cited publicly.
The Supreme Audit Court said in a statement that documented gasoline import costs had reached $1.8 billion by late December, adding that even under a high-end scenario, total imports for the full year would amount to around $2.7 billion, well below the president’s estimate.
Pezeshkian had told parliament earlier this week that the government spent about $6 billion importing gasoline this year, while budgeting roughly $8 billion in subsidized foreign exchange next year for essential imports, even as many goods were effectively priced at market exchange rates.
The president cited fuel and energy subsidies as a central distortion in Iran’s economy, arguing that higher consumption channels larger amounts of state support to wealthier households. He described the current system as inequitable and unsustainable, particularly as domestic fuel demand continues to rise.
The audit body warned against the use of inaccurate or unverified financial data in policymaking, saying that decisions on energy shortages and broader economic reforms should be based on “precise, transparent and verifiable information.”
The dispute comes as Iran grapples with chronic fuel shortages, rising imports and a widening gap between domestic production capacity and consumption. Officials have said inefficient vehicles, smuggling and low prices have pushed gasoline demand well beyond refinery output, forcing imports despite Iran’s status as a major oil producer.
While the audit court challenged the scale of gasoline imports, it did not dispute broader concerns over subsidies, which economists say absorb tens of billions of dollars annually and weigh heavily on public finances.
A reformist daily, Etemad, said in an editorial on Monday that Iran’s budget debate reflects a deeper problem: a persistent gap between official plans and economic realities.
“The distance between what is written on paper and what happens in practice remains deep and worrying,” the paper wrote, adding that promises to reform spending and target resources have repeatedly translated into pressure on “transparent and productive” sectors rather than on inefficient or tax-exempt entities.
The editorial argued that quasi-state and semi-private companies continue to operate in a “safe zone,” contributing little in taxes despite controlling a significant share of economic resources. “A large portion of national resources circulates within this gray structure without an effective return to the public budget,” it said.
The paper also warned that a 25% rise in bond issuance signaled growing reliance on borrowing, shifting fiscal pressure into the future without generating sustainable growth.
The gasoline cost dispute adds to pressure on Pezeshkian’s government as lawmakers review the budget for the Iranian year beginning in March, against a backdrop of high inflation, currency weakness and public frustration over living costs.
The dispute unfolded as shopkeeper protests linked to the rial’s plunge continued in Tehran for a second day on Monday.
Hadi Kiadaliri, vice president of Iran’s Forestry Association, said studies show the country now holds the global record for soil erosion, a problem he attributed to unsustainable land use, water-intensive agriculture and weak integration of environmental limits into economic planning.
“Based on the results of one study, restoring soil fertility in the Zagros would require allocating 50% of annual oil income,” Kiadaliri told ISNA news agency, calling the cost a measure of how deeply natural capital has been depleted.
The Zagros range stretches across western Iran and underpins large parts of the country’s water cycle, biodiversity and rural livelihoods. Environmental experts have long warned that erosion, deforestation and overgrazing in the region threaten food security and increase flood and drought risks.
Kiadaliri said Iran’s development path had relied heavily on expanding agriculture despite the fact that about 93% of the country is classified as arid or semi-arid.
Between 2004 and 2020, he said, farmland expanded by around 3.6 million hectares, largely at the expense of forests and rangelands – an average loss of about 500 hectares of natural land per day.
Water resources have also been overexploited to sustain agricultural output, he said, arguing that food security had been narrowly defined as supply rather than resilience. “Environmental resilience is part of food security,” Kiadaliri said, adding that ignoring it has undermined long-term productivity.
He said international experience shows that environmental protection and economic development are not mutually exclusive, pointing out that no highly developed country has achieved sustained growth while degrading its natural environment.
Iranian officials have increasingly acknowledged environmental stress as climate change, drought and land degradation intensify.
The Department of Environment has recently pushed to formally value ecosystem services – such as water regulation, soil protection and carbon storage – a step Kiadaliri said could make environmentally damaging projects economically unviable once their true costs are accounted for.
“If ecosystem services are properly valued, many projects will no longer make financial sense,” he said, arguing that such accounting could curb further environmental damage.
Environmental groups say without structural changes in land management, water use and development planning, Iran’s soil erosion will continue to accelerate, raising long-term economic and social costs far beyond the immediate price of restoration.
Authorities say emergency dredging of the Ashouradeh channel in recent years helped restore limited water flow, reduce salinity and prevent the bay and the nearby Miankaleh wetland from drying out completely.
But experts caution the measures have only bought time, leaving the fragile ecosystem vulnerable to continued retreat of the Caspian Sea, disrupted natural inflows and renewed sedimentation.
Saeed Rasouli, head of Iran’s Ports and Maritime Organization, said studies carried out by the agency showed that pumping water from the Caspian Sea into the bay was a necessary parallel step to dredging, but the plan has not yet been fully implemented.
He said updated engineering assessments were under way to determine how much of the current degradation is due to reduced depth, falling sea levels or new sediment layers.
Officials say feasibility studies have confirmed that installing pumping stations could help sustain the bay for at least the next 20 years, but the project remains stalled pending further technical work and implementation by the energy ministry.
Rasouli added that Iran had urged greater regional cooperation at a recent Caspian Sea meeting, warning that the shrinking bay reflects a broader environmental challenge shared by all five littoral states.
“When people are struggling with livelihoods, you cannot govern,” Pezeshkian told the open session. “They say increase wages; someone tell me where I should bring the money from?”
The draft budget submitted to parliament proposes a 20% rise in public-sector wages, while expanding income-tax exemptions to soften the hit from inflation, which has remained among the highest in the world.
Pezeshkian acknowledged the increase “is not proportionate to inflation,” but said the government had tried to compensate by raising tax-free thresholds.
Under the proposal, salaried workers earning up to 400 million rials a month (about $282) would be exempt from income tax, while those earning between 400 million and 930 million rials ($282–$655) would pay a 10% rate, according to figures cited by Iranian media.
Pezeshkian said the budget’s main aim was to reduce what he called “the fire of inflation” and avoid a deficit that fuels money creation. He said the government had raised its own current spending by only 2%, cutting what he described as nonessential lines and moving toward “performance-based budgeting,” under which ministries would have to specify services to receive funds.
Parliament Speaker Mohammad Bagher Ghalibaf said the budget’s wage assumptions needed further work, warning that household livelihoods were at stake.
“The importance of the budget is clear for all of us … the budget is people’s lives,” Ghalibaf told lawmakers, adding that the 20% wage increase “has its problems and needs to be corrected.”
Lawmakers warn currency slide and subsidy policy risk stoking prices
Several lawmakers used the debate to attack what they described as a lack of credible plans to stabilize the currency and contain inflation.
MP Mohsen Zanganeh said advisers to Pezeshkian believed the exchange rate would rise in line with inflation, which he said implied a roughly 40% increase by the end of the next year.
“Mr. Pezeshkian, your economic team has accepted that it does not have the ability to reduce inflation and control the currency rate, and therefore it is only seeking to give vouchers,” Zanganeh said.
Jabbar Kouchakinejad, a deputy head of parliament’s budget committee, said officials appeared unwilling to curb the exchange rate’s rise and suggested the government might be using hard-currency sales to plug fiscal gaps.
“It seems there is no will in the government to control the exchange rate and balance it,” Kouchakinejad told ILNA, adding: “This trend is continuing quickly and prices are rising rapidly.”
Pezeshkian said the government planned to expand targeted support, including a consumer voucher program, arguing that price swings in the currency market feed directly into household costs.
The government spent about $6 billion importing gasoline this year and had budgeted around $8 billion for subsidized foreign exchange for essential imports next year, while many goods were effectively priced at the market rate, according to the president.
He also pointed to energy subsidies as a core distortion, arguing that higher consumption channels more state support to wealthier households. He described the system as inequitable.
Iran has recently introduced a three-tier gasoline pricing system, keeping subsidized rates while adding a higher tier aimed at limiting subsidy costs and discouraging non-card refueling and quota overuse, a move officials have presented as gradual reform after past price hikes triggered unrest.
The budget deliberations come as Iran’s economy faces chronic inflation, sanctions pressure, and financial constraints that officials say limit room for maneuver, even as the government argues it is trying to protect lower-income households through tax exemptions and targeted aid.
The rial slid on Sunday to a new record low of 1,420,000 per dollar, as point-to-point inflation ran at over 50% and the central bank reported the economy had contracted despite a modest rise in oil output and sales.
