Iran Economy NewsIranians Are Facing the Worst Fall in Purchasing Power...

Iranians Are Facing the Worst Fall in Purchasing Power in History

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The largest drop in food purchasing power in Iran’s history has been reported. According to annual statistics, the volume of the loss of purchasing power of Iranian households has reached its highest level in 2021.

If during the years of the Iran-Iraq war people faced a shortage of goods to supply their food, this year the famine situation has been imposed on households not by a shortage of goods but by high prices and disproportionate wages to inflation. The economist Ehsan Soltani used the term “imposed famine” to describe the effects of this fall.

Citing the national average in the last two years, incomes and salaries have increased by 30 percent, and the inflation rate has risen above 50 percent, which means that the income of families has fallen behind inflation above 50 percent.

For four years now, food prices have been on an increasing circuit, and the ratio of food growth to wage growth has been much higher. This is the first time that this is happening in Iran.

In the history of Iran, food price growth to wage growth has lasted just for a year, and each time in the following year, food prices have become relatively stable and there has been purchasing power for it. But now, for the first time in four consecutive years, food prices have continued to grow far more than wage growth, and this tragedy has created the biggest fall in household purchasing power.

Also, according to data from the Statistical Center, the food inflation rate of the three low-income deciles reached above 60 percent this September, unprecedented in the last four decades.

Meanwhile, the first decile of income has suffered less inflation than low-income deciles, the edible inflation rate of low-income deciles is above 61 percent, and inflation imposed on the poor is currently 4 units higher than high-income ones.

Last year, at the same time, the inflation rate of low-income deciles was 21 percent, and the difference was less than one percent from the inflation rate of the high-income deciles.

With the sharp decline in the purchasing power of Iranian families, red meat, rice, and beans, etc. are removed from the basket of many households, and the head of the supermarket union announced the closure of about 20 percent of supermarkets because of the expensive food.

After the growth in the price of common foods such as meat, rice, and beans, low-income households inevitably have removed these goods from their list of purchases and have opted for alternative commodities.

However, with government policies and decision-makers and the elimination of government currency from items such as rice, sugar, and food inputs, alternative commodities were not spared from expensiveness.

For example, the price of bread was held steady in 2018 and 2019, but this year suddenly it increased more than three times.

The most important culprit in these costs and lack of protectionist policies is the government’s corrupt relationship with large private and rent-seeking enterprises.

Oil, gas, electricity, and water, which are among the public assets, are given to private enterprises and rent-seeking companies at very low prices, who are making billions of profits.

According to calculations last year, the annual net profit of 20 large private enterprises was equivalent to the total budget deficit of the government.

Meanwhile, only through the increase in the price of minerals, water, electricity, and gas of industrial and government-private enterprises, 500 trillion tomans of income will be generated, which can be directed towards financing welfare protection policies and strengthening the purchasing power of households.

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