Despite Fall in Inflation, Ordinary Iranians Face Hardship

In Iran, news that the country’s inflation rate has fallen has been cause for celebration — at least by the government.

Recent figures suggest a move towards tentative recovery, but there is still a long way to go: according to official statistics, the inflation rate from October 2013 to October 2014 was at 19.1 percent, with an average monthly rate of 14.2 percent — half of what it was in the last year of Mahmoud Ahmadinejad’s rule, but still remarkably high. President Rouhani’s cabinet and pro-government economists are working hard to ensure the rate continues to fall steadily, and to stabilize prices across the country.

As Iran and the P5+1 countries reached the end of the latest round of nuclear negotiations in Vienna, some experts voiced hope for improvement in the coming months. Yet, when it comes to sanctions and Iran’s structural economic deficiencies, it has become clear that there is no quick fix. Less than a week after talks finished, the Iranian government announced it would be increasing the price of bread by 30 percent, putting an end to the affordability of one of the most important items in the shopping baskets of ordinary people. In Ardabil, northwestern Iran, the hikes were said to be as high as 65 percent.

So how have the lives of ordinary citizens been affected by falling inflation? Has the average household noticed any change in the cost of living? We asked people from different walks of life about what economic instability has meant for their lives. Among those who are barely making ends meet, many said that there is no margin for security. The slightest health problem could push their fragile finances over the edge, leading them into bankruptcy.

Medical Bills, High Food Prices and the Charity of Friends

Reza, a 55-year-old worker and father two young children, lives in his own home in Hassan Abad, a low-income neighborhood in southern Tehran. He earns roughly $350 a month and buys his food and other household items from factory outlet stores, where prices are more affordable. Reza spends roughly $150 to $175 on food each month, which includes three kilos (six pounds) of protein. Before the government announced increases to the price of bread, the cost had stayed roughly the same, helping Reza with his monthly budget. But everything else fluctuated in price: dairy products cost so much that his family was forced to cut down on these items. Reza pays monthly instalments for a mortgage and medical bills for his youngest child, who suffers from heart problems. At the end of the month, he has nothing left over.  

Fattaneh, a 67-year-old widow, is a retired teacher who lives alone in a small apartment. She receives $300 from her pension each  month, out of which she pays insurance and taxes. Another $35 goes on her utility bills. She spends around $80 to $90 on protein, but this does not include red meat, which she has not bought for years: it costs twice as much as chicken. She clubs together with family and friends to buy rice in bulk, which works out cheaper. Before the government announcement about bread prices, Fattaneh noticed the cost of this staple food had actually fallen in recent months, but this has now come to an end.

Fattaneh suffers from medical problems, and her teachers’ insurance ID is only accepted at a handful of clinics and hospitals. Even in these places, her insurance does not cover dental or optician appointments. For Fattaneh, a serious illness would mean one thing: bankruptcy.

Behnam, a 49-year-old veteran of the Iran-Iraq war, was wounded during an Iraqi chemical attack when he was only 17 years old. He lives in southwest Tehran, close to the famous Azadi Square, with his family, including a 21-year-old son and a 17-year-old daughter. Behnam has to spend $350 on medication per month, a cost partially covered by the Veterans Foundation — but only after Behnam went through a rigorous review process and several bureaucratic loops.

Behnam cannot work in an office because of his medical condition. He works from home and has a fixed income of $500 a month, from which he has to pay $150 in rent. Because he  is usually behind on his bills and his rent, Behnam relies on friends and former comrades in arms. They help cover his rent and lend him an average of $5,000 to $7,000 each year. Neighborhood shopkeepers sell him food on credit; he pays when he has the money. His family consumes between $150 and $175 of meat products per month, and they buy bread from villagers to save some money, though even this arrangement is likely to be affected by the government increases. Behnam is a proud man. He does not want to call on the government or receive social security benefits. “I do not want to take away what is someone else’s,” he says.

He still holds Ayatollah Khomeini, the founder of the Islamic Republic, in high esteem. If he could go back in time, he says, he would still go to the frontline in the war against Iraq. But he would not agree to go to war today to protect the Islamic Republic and what it has become. “I will not fight and I will not let my child go to fight for a regime that promotes corruption, addiction, theft and lies under the name of religion”. Although he believes inflation is under control and prices have stabilized, he says nothing has changed for him. “Red meat is still $12 per kilogram, and I still have to buy it on credit”.

Masoud’s situation is different. A veteran dentist with more than 20 years’ work experience, he lives in the upscale neighborhood of Niavaran with his wife and two kids. His gross monthly income varies from $7,000 to $10,000. His family spends from $500 to $750 on food each month. He does not know the exact price of red meat in Tehran, but he knows his family consumes 10 kilos (22 pounds) of meat products per month. For them, meat is a part of every meal. He buys unsubsidized bread.

“Prices have not declined, but they have not increased either,” Masoud says. For him, predicted increases in energy prices and water rates are the real concern. If the rial loses its value again, his dental practice will face difficulties.

Most of the individuals we interviewed —except for Masoud, the dentist — are faced with medical bills, and credit is not accepted. They may be eligible to apply for insurance, but it is a long process marred by overly bureaucratic systems and slow-moving public agencies. Fattaneh and Behnam do not trust these government-run services, believing that the agencies will go to great lengths to avoid paying out anything.

None of our interviewees had anything left over at the end of the month to put towards their savings. They are aware of the news: inflation is slowing down. But for them, food and energy prices remain high and their options are limited – and often diminished. Many households must choose between meat or dairy products.

No Safety Net

The government talks of economic efficiency and growth, but there is no support network for the average Iranian consumer. Despite his health issues, Behnam is fortunate to have the support of his friends and fellow veterans. But his case is unique. Retirees like former teacher Fattaneh cannot count on the support of government institutions, even though they worked for them for decades.

It remains to be seen how the government deals with the next set of challenges. Because the deadline for nuclear negotiations has been extended until summer 2015, Iran’s access to its oil revenues will be limited to $750 million per month. The government’s announcement on bread prices came only a week after talks finished in Vienna. Iran’s currency, the rial, has lost 10 percent of its value against the United States dollar. Many fear inflation will rise again. 

Though analysts predict inflation will stay at  between 18 percent and 21 percent, for the average Iranian consumer, there is no relief, especially if they have a fixed income. 

President Rouhani and his administration have every right to celebrate. Inflation rates have fallen; the economy is rallying, if only slightly. But falling inflation has not led to falling prices — something ministers seem to have missed. Consumer spending is still recovering from the damage done in recent years, badly affected by price hikes in some of the most basic household goods. The recent increase in bread prices is a further blow to people’s confidence and financial security. It will be some time before a more stable economic environment will translate into improved conditions for consumers. President Rouhani may have achieved something, but so far, his policies have had no impact on the average Iranian’s quality of life.