Sat, June 15, 2024

Iran’s Budget Deficit Doubles Under Raisi’s Leadership

Economy and tensions - iran

Quick Look:

  • Under President Raisi, Iran’s government budget deficit has significantly worsened, with debts to the banking system doubling.
  • Iran’s inflation has reached historic highs. The annual inflation rate for 2024 peaking at 52.3%, severely affecting the cost of living.
  • Essential goods and services have seen drastic price increases, with a 291% rise in gold prices and a 160% surge in dollar prices over 32 months.

The financial state of Iran has deteriorated significantly under President Ebrahim Raisi’s administration. An alarming increase in the government budget deficit has appeared. According to reports from the Central Bank, the government’s debts to the banking system have doubled during Raisi’s term, signalling severe fiscal mismanagement.

The annual budget details from 2017 to 2020 reveals a consistent 30% annual deficit. Compounding the issue, Raisi’s predecessor, Hassan Rouhani, had instructed the Central Bank to cease the publication of budget realization reports in 2018, obscuring the true extent of the fiscal challenges faced by the government.

Iran’s Inflation Peaks at 52.3% in 2024

Inflation in Iran has surged to unprecedented levels, severely impacting the cost of living for ordinary citizens. The inflation report for December 2023 disclosed a staggering 54.2% point-to-point urban inflation rate, with the average urban inflation rate reaching 55.9%. The annual inflation rate for 2024 peaked at 52.3%, the highest in eight decades. The meat sector experienced the most significant price increases, leading to the inflation rate among commodities at 50.9%.

Moreover, public transportation services were not spared, with the sector recording a 58% inflation rate. Particularly concerning is the red meat and poultry group, which saw about 74% inflation in the 12 months leading up to May 2024. Housing sector inflation also exceeded 40%, exacerbating the financial strain on Iranian households.

Gold Prices Surge 291% Under Raisi

Under Raisi’s government, the prices of essential goods and services have soared. The price of a gold coin skyrocketed by 291% within the first 32 months of his administration. Similarly, the dollar price surged by 160% over the same period. Rental rates substantially increased by 44% in 2022 and 52% in 2023. The food sector did not escape these rampant price hikes, increasing by 60-100% in 2023, further burdening the Iranian populace.

Iran’s GDP Grew by 5% in 2023

Despite the bleak economic indicators, Iran’s GDP experienced growth, primarily driven by a substantial rise in oil production and increased government spending. In 2023, the GDP grew by 5%, attributable to a 21.8% boost in oil production and a 16.7% increase in government expenditure.

The International Monetary Fund (IMF) estimated the GDP growth for 2024 at 4.7%, with predictions for 2024 and 2025 at 3.3% and 3.1%, respectively. However, experts warn that this growth is unsustainable and has not translated into improved living conditions for the Iranian people.

Unemployment Rate Declines to 8.1% by April 2024

The reported decrease in the unemployment rate from 12% in 2020 to 8.1% in April 2024 is misleading. This decline is primarily due to a significant reduction in active job seekers, with 3.5 million people discouraged from seeking employment. Consequently, the labour force participation rate has fallen from 44.5% to 41%, indicating a shrinking workforce rather than genuine job creation.

Deteriorating Livelihoods and Food Consumption

The worsening economic conditions have profoundly impacted the livelihoods of Iranians, leading to decreased food consumption. In 2022, the daily calorie intake per capita dropped by 22% to 2,100 calories, falling below the standard nutritional levels. Red meat consumption in 2024 plummeted to 732,000 tons, a 32% decline compared to 2020. The rising costs of essential goods and stagnant wages have forced many families to reduce their consumption of food and beverages, highlighting the dire state of living conditions under Raisi’s government.

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