TEHRAN —
Outside his butchery in the south of
Iran’s capital, Ali cuts up a sheep
carcass for customers who, like him, have seen inflation and subsidy reform
devour their purchasing power.
اضافة اعلان
“My sales have
fallen significantly — almost by half,” Ali, 50, told AFP.
“What can I say?
I am a butcher and you may not believe me, but sometimes I don’t eat meat for a
week,” he added. “Everything has gone up in price.”
Inflation is
making an unwelcome comeback globally — stoked by high energy and food prices,
driven largely by Russia’s invasion of Ukraine, a major wheat producer, and by
related sanctions on Moscow.
But Iran has been
wrestling with rampant price growth for years, exceeding 30 percent annually
every year since 2018, according to the International Monetary Fund.
That was the
year
US president Donald Trump yanked Washington out of a nuclear deal between
Iran and world powers and began reimposing biting sanctions, sending the
currency into a tailspin even before he unilaterally banned Iran’s oil exports.
Negotiations
over the last year or so have sought to bring the US — under Trump’s successor
Joe Biden — back inside the deal and convince Tehran to re-adhere to nuclear
commitments it has progressively walked away from.
But those
ever-delicate efforts have been deadlocked since March, and an escalating spat
between Iran and the UN’s nuclear watchdog could reduce chances of reviving the
agreement.
Subsidy cuts compound misery
After dividing the cuts of meat, Ali hands Asghar, a retired government
employee, a plastic bag containing enough for him and his wife.
“The price of
everything has gone up, including meat,” lamented Asghar, 63.
“We used to buy more. Now everyone is buying less —
everyone is under pressure.”
Economic analyst
Saeed Laylaz believes price growth in Iran has exceeded 40 percent annually
since 2018 — higher than that calculated by the IMF.
It has lately
been fuelled further, he says, by “the sharp increase in global inflation”
driven by fallout from the war in Ukraine and by Iran’s cash-strapped
government in mid-May enacting the “radical reform” of slashing subsidies.
The expert, who
has in the past advised Iranian presidents, said the main policy shift by the
government of
President Ebrahim Raisi was to abolish a subsidized exchange rate
for imports of household essentials — wheat, cooking oil and medicine.
Introduced in
mid-2018, this “preferential” rate was fixed at 42,000 rials to the dollar,
cushioning citizens from the savage black market depreciation of the local
currency that stemmed from the US withdrawing from the nuclear deal.
But with the
exchange rate on the black market exceeding 300,000 rials to the greenback and
global food prices soaring, the arrangement became unaffordable.
“It is estimated
that if Iran wanted to continue reckless spending of hard currencies this year
like the previous years, the country would have needed $22 billion dollars at
the preferential rate,” he said.
“Even in the
event of reviving the nuclear agreement, ... the government had no choice but
to cancel the preferential rate,” he added.
Red meat prices
have risen 50 percent, chicken and milk prices have doubled, spaghetti has
tripled and cooking oil prices have quadrupled since early May, according to
figures published by Iranian media.
Protests over prices
Hundreds of Iranians have taken to the streets of several cities to
protest against the spiraling prices, on top of months-long demonstrations by
professionals and pensioners demanding wages and pensions be adjusted for
inflation.
On Tuesday,
Labor Minister Hojjatollah Abdolmaleki stepped down in the hope of
“strengthening cooperation within the government and improving the provision of
services to the people,” according to government spokesman Ali Bahadori-Jahromi.
But reformist
newspaper Etemad linked his resignation to “heavy criticism” from the
protesting pensioners.
In Tehran’s
marketplaces, attention is focused on the consequences and effects of
inflation, rather than its causes.
President Raisi,
an ultra-conservative who took office last August, pledged from the outset that
the painful subsidy reform would not affect bread, fuel and medicine prices.
Demand for bread
is therefore increasing.
“The queues at
the bakeries have become longer because the price of rice has risen, and people
are resorting to bread,” Shadi, a housewife wearing the Islamic chador told AFP
near a traditional bakery in southern Tehran.
Inside, the
baker Mujtaba agrees.
“People ... are
no longer able to buy rice, cooking oil, spaghetti, and tomato paste,” said the
29-year-old, his face drenched in sweat as he took a break from preparing
dough.
The subsidy
reform has so far done little to steady the black market exchange rate, which
slipped to an all-time low of more than 330,000 to the dollar on June 12, and
hopes for a restoration of the nuclear deal have receded.
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