On Sept. 10, Iranian President Hassan Rouhani admitted on live TV that inflation has surpassed 39% and that Iran's economic conditions are undesirable for Iranian society. Inflationary pressures in the absence of appropriate income adjustments produce undesired consequences for household economics. This short analysis will try to assess the impact of inflation on household economics and the short- and medium-term consequences for Iranian society.

Former President Mahmoud Ahmadinejad had instructed key institutions not to publish statistics on household expenditures in the aftermath of subsidy reforms. Now that a new government is in place, the Central Bank of Iran (CBI) has finally published a report outlining household expenses in the Iranian year 1390 (March 2011 to March 2012). This was the first full Iranian year in which the initial phase of the country’s subsidy reforms had taken shape, i.e. blanket subsidies on food and fuels had been partially removed and direct cash hand-outs were paid to about 80% of the Iranian society. The then-government’s claim was that cash hand-outs were sufficient to compensate for the inflationary impacts caused by price adjustments. This claim can now be tested through official statistics.

The following table summarizes the categories of household expenditures for the average Iranian family between the year 1390 and the year 1388 (March 2009 to March 2010), i.e., the last year where the old system of blanket subsidies was still in place.

Table: Net annual expenditure in Iranian households