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Iran's Latest Inflation Figure Tops 50 Percent - Food Prices Jump 85 Percent

Tehran Forex market (Currency Exchange Market) on December 12, 2018.

Iran’s latest monthly inflation rate has hit 51.4 percent, according to the Iranian Statistical Center (ISC). The first month of the Iranian year (March 21-April 20) showed a more than 50 percent rise in prices compared to the same month last year.

ISC also reported that the inflation rate in the past 12 months reached 30.6 percent. This is lower than the International Monetary Fund’s estimate of inflation in Iran in 2018, at 31.2 percent. For 2019, IMF has predicted inflation at 37.2 percent.

Iranian institutions usually underreport inflation and unemployment rates, but ISC’s figures are sometimes closer to reality than statistics offered by other institutions.

Worsening economic conditions, specially inflation and unemployment led to mass protests across Iran in late 2017, early 2018. The government suppressed the revolt by arresting thousands of protesters.

What is more alarming for ordinary Iranians in ISC figures is the rise in prices for food, drinks and tobacco. In the latest Iranian month, prices for these three daily consumer items have jumped 85.3 percent compared to a year ago.

The Iranian currency rial began a steep fall one year ago, as the markets felt uneasy about the possibility of the United States pulling out of the 2015 nuclear agreement and reimposing sanctions. When in May 2018 President Donald Trump announced the U.S. withdrawal from the deal, the Iranian currency devalued faster, losing its exchange rate almost fourfold against the USD and other major currencies.

At the beginning of 2018 one US dollar bought around 40,000 rials, while now it fetches more than 140,000 on the non-governmental or free currency market.

The fall of the currency, which stems from the inherent weaknesses of the Iranian economy and accelerated by U.S. sanctions led to an ever higher rate of inflation in the country.

The annual rate of inflation for food, drinks and tobacco was 45 percent and other items 25 percent according to ISC’s estimates.

The annual rate is usually calculated by comparing a given period of 12 months with the averages of the previous 12-month period.

These latest figures also show that inflation was much higher in rural areas, standing at 59.4 percent, compared with urban areas at 50 percent.

Vegetables had the highest monthly price increases at 155.6 percent followed by meat at 117 percent in March 21-April 20, 2019 compared to the same month in 2018.

Both vegetables and meat are being exported to neighboring countries, as the falling Iranian currency opens up a huge gap in domestic and foreign prices. For wholesale dealers it is much more profitable to export these items than sell them at domestic markets.

Recently, the Iranian government has announced bans on exporting various food items, including onions in late March, when one kilogram of the important food staple reached $1.25. While this might not seem too high compared with other countries, for a minimum wage earner in Iran it can be a prohibitively high price. The minimum wage is around $110 monthly for many Iranian workers.