Iran Grapples with Deepening Economic Crisis Amid Soaring Inflation and Widespread Poverty

Economic Hardship Intensifies Across Iran

The Islamic Republic of Iran is experiencing a profound economic crisis, characterized by persistently high inflation, a depreciating national currency, and a significant portion of its population living in poverty. Recent reports from Iranian state-affiliated media and various economic analyses paint a grim picture of the country's financial landscape, with food inflation reaching alarming levels and millions struggling to meet basic needs.

According to the Statistical Center of Iran (ISC), food inflation surged to 64 percent in September 2025, with the cost of grains, bread, and fruits nearly doubling compared to the previous year. Another report from the ISC indicated that food prices had tripled over the past four years. The overall annual inflation rate stood at 38.9 percent in October 2025, with point-to-point inflation reaching 48.6 percent in the same month. The International Monetary Fund (IMF) projected an inflation rate of 42.4 percent for Iran in 2025.

Widespread Poverty and Declining Living Standards

The economic downturn has led to a significant increase in poverty across Iran. The official poverty line for 2024-2025 was set at 6,128,739 tomans per person per month. Estimates of the population living below the poverty line vary, but all indicate a severe crisis:

• The Research Center of the Iranian Parliament reported the poverty rate to be around 30 percent between 2019 and 2024, affecting approximately 25 to 26 million people.
• Former welfare minister Ahmad Meydari stated in September 2024 that at least 30 percent of Iranians, or about 25 million people, live in poverty, with 5 million in extreme poverty.
• Some unofficial and international sources suggest that as much as 80 percent of the Iranian population faces poverty, with one Iranian media outlet reporting that over 80 percent of Iranian households have fallen below the global poverty line.
• The Ministry of Social Welfare announced in 2024 that 57 percent of Iranians experience some level of malnourishment.

The deteriorating situation is also reflected in dietary changes, with over half of Iranians consuming fewer than 2,100 calories per day. Per capita meat consumption has dropped by 40 percent and dairy consumption by 30 percent over the past decade.

Root Causes: Sanctions, Mismanagement, and Energy Crisis

Analysts point to a combination of internal and external factors contributing to Iran's economic woes. International sanctions, particularly those reimposed by the United States, have severely limited Iran's oil exports and access to global markets. However, domestic issues are also significant drivers of the crisis, including:

• Chronic mismanagement and corruption: These issues are cited as pervasive, leading to misallocation of resources and hindering economic recovery.
• Energy crisis: Iran has been suffering from a systemic energy crisis since 2024, with electricity and gas shortages impacting both households and industries.
• Non-developmental strategy: Some economists argue that the government's prioritization of ideological and political agendas over economic progress has exacerbated problems.
• Financial isolation: Iran's blacklisting by the Financial Action Task Force (FATF) for failing to address concerns over terrorism financing and money laundering further isolates it from international financial systems.

The Iranian rial has experienced significant depreciation, falling to historic lows. In March 2025, the currency had depreciated to 927,000 rials per US dollar from 595,500 rials in August 2024. Capital flight has also been substantial, with over $20 billion reportedly leaving the country in the first nine months of the last year.

Government Responses and Outlook

In response to the escalating crisis, the Iranian parliament impeached Economy and Finance Minister Abdolnaser Hemmati in March 2025, holding him responsible for the worsening economic conditions. President Masoud Pezeshkian, who took office in mid-2024, had pledged to stabilize inflation and strengthen the currency, and has also committed to addressing the FATF blacklisting. The government and parliament are reportedly debating reductions in cash subsidies for 15 to 27 million people, a move that could further reduce household support.

Despite some official reports of modest economic growth, the outlook remains challenging. The IMF projects Iran's economy to grow by 0.6 percent in 2025, a figure significantly lower than regional averages. The Research Center of the Iranian Parliament noted a sharp deceleration in growth in June 2025, with the non-oil economy contracting by 0.2 percent. The combination of persistent sanctions, internal structural issues, and a deepening energy crisis continues to pose significant hurdles for Iran's economic stability and the well-being of its citizens.