Iran Fiscal Squeeze Strains Households As Defence Demands Rise Arabian Post

2026-09-04 04:11:25

(MENAFN- The Arabian Post) clearfix">Iran's worsening fiscal squeeze is spilling into daily life as collapsing oil revenue, a record-low currency and surging prices force Tehran to balance military demands against the cost of keeping fuel, food and other essentials affordable.

The pressure has sharpened after Iranian crude exports fell to roughly 260,000 barrels a day in August from about 1.7 million before the latest tightening of US economic pressure, draining the state's main source of hard currency. The rial has slipped beyond two million to the dollar, while inflation has accelerated and household purchasing power has deteriorated sharply.

Executive Vice President Mohammad Ghaempanah has openly questioned whether the government can sustain petrol at 15,000 rials a litre when the underlying cost is far higher. His comments came as long queues formed at filling stations in several cities and officials faced renewed debate over subsidies that have long kept fuel prices among the lowest in the world.

<p>Any increase would risk adding to household costs at a time when wages are failing to keep pace with inflation. Urban consumer prices in August were 84.4 per cent higher than a year earlier, according to central bank data cited in Iranian public reporting. Food and beverage prices had already risen 128.1 per cent year on year in July.</p><p>Workers' representatives say the gap between earnings and basic expenses has become severe. Hosein Rasouli, head of the Workers' House in Razavi Khorasan province, put a typical worker's monthly income at about $82 at this week's exchange rate. Another labour representative in Hormozgan estimated a family's basic monthly consumption basket at about 900 million rials, compared with minimum wages of roughly 170 million to 180 million rials.</p>See also  Hormuz shipping remains severely curtailed amid tensions <p>Job losses are compounding the squeeze. Esmail Hajizadeh, a workers' representative in Hormozgan, said about 20,000 employees had lost jobs as businesses shut or reduced staffing. Some companies had cut workers to 10 days of employment a month, while others had directed staff towards unemployment insurance, he said.</p><p>Petrol remains politically sensitive because previous attempts to raise prices triggered protests. Authorities have therefore relied on rationing and subsidies, even as shortages and the gap between controlled and market costs persist.</p><p>The fiscal strain is also exposing a widening argument over spending priorities. Hardline lawmaker Ismail Kowsari has urged parliament and the government to use all available capacity to raise military and defence spending, as the armed forces rebuild capabilities damaged during months of conflict.</p><p>Parliament Speaker Mohammad Baqer Qalibaf has also stressed military reconstruction, saying this week that Iran's forces had made major advances in rebuilding offensive and defensive capabilities. Yet he has previously acknowledged that military strength alone cannot sustain the country if households face hunger, weak economic activity and shrinking national production.</p><p>President Masoud Pezeshkian's government has sought to reassure the public that the economy remains functional. Central Bank Governor Abdolnaser Hemmati said Iran had enough foreign currency and could inject as much as $2 billion into the market. He said the central bank had supplied more than $18 billion since March 21 for imports including food, medicine, animal feed and industrial raw materials.</p><p>That support is becoming harder to finance as oil income contracts. The World Bank says Iran's economy is under mounting pressure from conflict, sanctions, damaged infrastructure, water and energy shortages and weaker investment. It estimated gross domestic product contracted 2.7 per cent in the Iranian year ending March 20, while warning that disruption to oil exports could impose severe additional fiscal pressure.</p>See also  OPEC output rebounds as Gulf supplies return <p>The International Monetary Fund projected in July that Iran's economy would shrink 5.4 per cent in 2026, with inflation approaching 70 per cent. Higher import costs and a weaker currency risk pushing the burden further onto consumers even when shops remain supplied.</p><div class='code-block code-block-1'><h2></h2></div>

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Iran Fiscal Squeeze Strains Households As Defence Demands Rise Arabian Post

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