Iranian President Masoud Pezeshkian Addresses Severe Economic Crisis Amid Escalating Protests

President Acknowledges Deepening Economic Woes

Iranian President Masoud Pezeshkian has publicly addressed the severe economic crisis gripping the Islamic Republic of Iran, acknowledging the profound challenges of soaring inflation and the significant depreciation of the national currency, the rial. His remarks come as the country faces widespread protests that initially erupted over economic grievances and have since escalated into broader anti-government demonstrations across multiple cities.

Speaking on various occasions, including a parliamentary session on December 28, 2025, to defend the annual state budget, and in earlier statements in November 2025, President Pezeshkian attributed the persistent inflation partly to 'excessive government spending and an overgrown bureaucracy'. He emphasized the government's inability to raise wages in line with the current inflation rates and declared it 'unacceptable' that hunger persists in an oil-rich nation.

Iran Grapples with Soaring Inflation and Currency Collapse

The economic landscape in Iran is marked by critical indicators reflecting a deep crisis. Inflation surged to 48.6% in October 2025 and stood at 42.2% in December 2025, severely impacting household budgets. Food prices alone witnessed a staggering 72% year-on-year increase, with health and medical goods rising by 50%.

The Iranian rial has experienced a dramatic decline, reaching a record low of approximately 1.45 million to the US dollar by December 29, 2025, or 144,000 tomans per dollar. This represents a loss of roughly 40% of its value since the Iran-Israel war. The economic strain has pushed between 27% and 50% of Iranians below the poverty line, with reports from 2024 indicating that 57% of the population experienced some level of malnourishment. Unemployment among males aged 25 to 40 is estimated at 50%.

Underlying causes for this crisis include persistent international sanctions, particularly those from the United States, coupled with domestic mismanagement, rampant corruption, geopolitical instability, structural inefficiencies, and a systemic energy crisis.

Presidential Measures and Budgetary Challenges

In response to the crisis, President Pezeshkian has outlined a fiscal strategy focused on eliminating the budget deficit, controlling inflation, and enhancing transparency. He presented a budget for the Iranian year starting in March 2026, proposing a 20% rise in public-sector wages. However, he acknowledged that this increase is 'not proportionate to inflation', aiming instead to compensate through expanded tax exemptions and targeted subsidies.

A significant policy shift includes the decision to eliminate heavily subsidized exchange rates, which the President stated had encouraged 'rent-seeking' and failed to protect households despite billions of dollars in state support. He announced that subsidies, amounting to approximately $18 billion, would be redirected to end consumers rather than producers or intermediaries. Furthermore, Pezeshkian reshuffled the leadership of the Central Bank of Iran, reappointing Abdolnaser Hemmati to address currency volatility.

Nationwide Protests Escalate Beyond Economic Grievances

The current wave of unrest began on December 28, 2025, with initial protests by shopkeepers and bazaar merchants in Tehran, including the historic Grand Bazaar, over the collapse of the rial and rising prices. These demonstrations quickly spread to universities and other major cities such as Esfahan, Hamadan, and Mashhad, evolving beyond purely economic demands to include calls for systemic change and the overthrow of the Islamic Republic, with chants like 'Death to the Dictator'.

These protests represent the largest demonstrations in Iran in three years and are considered the most serious challenge to the Islamic Republic since the Woman, Life, Freedom movement in 2022-23. While President Pezeshkian has acknowledged the 'legitimate demands' of protesters and their right to peaceful assembly, authorities have also warned of a 'decisive response' to any actions that lead to insecurity or damage public property. Tragically, at least seven fatalities have been reported among security forces and protesters by January 1, 2026.