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Economic Crisis In Iran Leading To Job Cuts And Inflation

Tehran stock exchange, August 2018

Iranian Auto parts manufacturers says 450 thousand workers in this industry are likely to lose their jobs as a result of Iran's foreign currency crisis. At the same time, Iranian media report that rising prices of foodstuff and cost of housing on a daily basis make life harder for most Iranians.

Reports indicate that low-income Iranians have been losing their purchasing power during the past few weeks as the cost of living rises because of Iran's ongoing economic crisis, following the US pull-out from the nuclear deal with Tehran.

This has caused the Iranian currency to nosedive in recent months, making imports much costlier. As a result, essential goods are becoming prohibitively expensive for many as well as handicapping manufacturers who need to import raw materials or parts.

On Tuesday the price of poultry meat went up from 97,000 to 111,000 rials per kilo. This comes while red meat price has risen to 600,000 rials per kilo, which is more than twice the rate the government announces for essential goods, which the retailers ignore.

Meanwhile, according to the IRGC-linked Tasnim news agency, the price of a pack of 30 eggs has been floating between 136,000 and 210,000 rials.

Other reports say the price of dairy products has risen by 18% and the price of fresh fruit by over 64% during the past week. During the same period the price of tea and sugar has had a 19% hype.

The Iranian Statistical Center, a governmental organization, has announced the average rise in the cost of housing in Tehran at 19%, while Mehr News Agency, also a government entity affiliated with the Islamic Propagation Organization, reported the cost of housing in Tehran has risen between 40 to 60% in various parts of the capital during the past year.

The main reason for this is flight of capital to the real estate safe-haven. When the Iranian currency steadily loses value, people have few option to protest their money. They have to either buy dollars and gold or invest in real estate.

Other reports say a serious shortage of medicine has led to such high prices that many cannot afford filling out their prescriptions even if they can find them in the pharmacies.

Hassan Mansour, an Iranian economist in London, told Radio Farda, that in spite of the constant price rises, wages have been frozen for a long time in Iran. He said millions of Iranian workers earn just around 10 million rials ($100 per open market rate) per month and there are no prospects for a wage increase for them.A year ago, 10 million rials was about $250 a month.

The situation of working Iranians might get worse as the economy is set to shed hundreds of thousands of jobs.

Speaking on the job losses in the automobile industry at a press conference in Tehran on Monday August 14, board members of the Auto Parts Manufacturers Association said the output of Iranian car makers is about to face an 80 percent decline because of rial’s loss of value.

Board Member Maziar Beiglu said so far 14,000 workers have lost their jobs in the auto parts industry.

He added that part makers will no longer be able to continue their business by September 22 if the government does not provide cheap dollars to pay for needed imports.

Iran's former Labor Minister Ai Rabiei had said last week that about one million Iranians would lose their jobs as a result of economic pressures caused by renewed US sanctions against Iran.

In the meantime, while auto parts makers reduced working hours at their factories, the Iranian Students News Agency (ISNA) reported on Monday that four Iranian car makers have stopped their activities in July.

This has reduced vehicle manufacturers output by 40 to 50 percent, the report added.

Another official has said vehicle and parts manufacturers currently need about three billion dollars in hard currency to meet their needs, adding that part makers are having problems about making payments for what they have already ordered.

He said part makers imported some components at the rate 0f 42,000 rials per US dollar, but now the government has increased the rate to 90,000 rials per dollar and that is why parts makers cannot clear their imports from the customs.

Most foreign car makers such as Peugeot, Mazda, Citroen, and Hyundai left Iran after the United States withdrew from the nuclear deal with Iran and vowed to impose penalties on foreign companies working with Iran.