When the Trump administration begins to revive the maximum pressure campaign, the Iranian economy remains trapped in an uncomfortable cycle of inflation, confirmed by the latest consumer price index data (CPI) in March 2025.
With a monthly increase of 3.3 % and an annual rate of 37.1 %, inflation reflects the struggles of millions of Iranians. This last number is a symptom of a long -term pattern, as the average annual inflation since the 1979 revolution (about 20.8 %) exceeds inflation rates before the revolution in Iran and regional and global averages.
There are several reasons for that. The lack of responsibility of the fiscal government does not create a continuous budget deficit. The system often funds this deficit by borrowing from the Iranian Central Bank, which leads to the expansion of the continuous monetary base. Such an unrestricted expansion nourishes the stress of inflation, eroding purchasing power and destabilizing the economy.
Regarding financial challenges, the Iranian Central Bank itself faces severe institutional restrictions. The lack of independence undermines its credibility and effectiveness. The bank operates under old regulatory frameworks and weak supervisory systems, which restricts its ability to implement influential monetary policies.
Current organizational practices impose the limits of strict amount on bank budgets. Although these policies outwardly inflame inflation, they fail in their declared mission while restricting the flow of credit necessary to enhance investment and innovation in the private sector.
The government is also sliding from the National Development Fund, which was established by the Islamic Republic at the time in 2011 to support long -term development projects. Poor allocation does not only prevent resources from infrastructure and critical investment, but also indicates their willingness to determine short -term financial relief priorities on sustainable economic growth.
Moreover, politically authorized lending increases inefficiency within the financial sector. By directing rare financial resources towards preferred projects in a political point of view, these states disrupt the market signals and collect the productive private sector investments. Such intervention contributes greatly to the chronic economic recession in Iran and leads to inefficiency throughout the economy.
External factors amplify these economic gaps. The tense international relations in Iran, especially because of the long sanctions and political isolation, are restricted by foreign currency flows and economic participation with the global community. This restriction inevitably leads to a volatile exchange rate environment, characterized by constant consumption of Iranian riyal in informal markets. This consumption leads to greatly inflating import costs, especially the effect on basic commodities. High food prices, for example, increased by 4.9 % in one month, which is not proportional to low -income families and increased social and economic inequality exacerbation.
The continuous interaction of high inflation and stagnant economic growth reduced the living levels of a large part of the Iranian population. The real income has decreased steadily, the erosion of savings, and economic opportunities remain limited. Since 1979, the rate of Iranian economic growth has failed to pre -revolutionary and international standards and standards. The real GDP of the individual did not exceed its peak before the revolution, showing contracts of potential decline and economic decline.
Treating the inflation crisis in Iran requires short -term policy reforms. The current political and political framework – which is characterized by financial discipline, weak monetary controls, political intervention, and international isolation – sustains the pressure of inflation while strangling economic development. Urgent need to shift the model.
This transformation requires the establishment of an independent central bank with specific and implementable states clearly focused on controlling inflation and the stability of the financial system. Strong regulatory reforms within the banking sector are necessary to enhance transparency, accountability and flexibility. Equally important, is the disciplined financial policy approach, which gives priority to long -term strategic investments on the immediate needs of budget and short -term political considerations.
In addition, reducing political intervention in the economic policy industry, especially in financial markets, will allow market mechanisms to work efficiently, which enhances a favorable environment for the growth of private sector and innovation. Iran must also follow the improved international economic relations, which reduces geopolitical tensions to achieve stability in its exchange rate and attract foreign investment, which is very important to continuous economic development.
The continuous inflationary crisis in Iran is not just symptoms, but a reflection of the deeper structural deficiencies within the framework of the current political and economic policy. Without structural reforms, inflation will remain a firm challenge, undermine Iran's economic stability and endanger the welfare of future generations and its prosperity.
After four decades of theocratic rule, the Islamic Republic proved that it is unable to enact the basic reforms necessary to reduce inflation and achieve stability at a low rate. The Iranians are right to question whether the problem today is just inflation, or rather a political system that is unable to address endemic problems and manage the economy professionally.
Ayatollah Rohla Khomeini mocked, “You cannot have a revolution about the price of watermelon.” If the governor of Iran today is not keen, they may prove the mistake of the founder of the Islamic Republic.
Dr. Saeed Ghassiminjad is a great advisor to Iran and the fiscal economy at FDD, specializing in the Iranian economy, financial markets, sanctions, and illegal financing. Follow it on LinkedIn and X Sghasseinejad.
It was published by Globes, Israel Business News – En.globes.co.il – on April 4, 2025.
© Copy Publish Publisher Itonut (1983) Ltd. , 2025.