Is Raising the Dollar Price a Way to Suppress Wages in Iran?

With the rise in the price of the US dollar, which has fluctuated into the 90,000 tomans range, many are talking about the 'disappearance or emptiness of the tables' of Iranians. In just the past few months, since the beginning of Masoud Pezeshkian's government, the price of the dollar in Iran has increased by about 50%, despite all the measures the government claims to have taken to make the dollar 'single-rate'. Some economists believe that the current acceleration in the dollar's price is influenced by the gradual elimination of the Nima currency and the failure to maintain preferential currency in the market. According to them, the current 'negotiated currency' version of the fourteenth government has failed to control the turbulent dollar market. Despite the payment of preferential currency for some goods and insistence on increasing it in the 1404 budget, the Iranian economy is so burdened by the pressure of the 'intensification of the currency gap' that many essential goods and food items like potatoes and rice have 'lost their brakes', and perhaps the policy of 'multiple exchange rates' can no longer control inflation in the face of the 90,000 toman dollar. In the program 'Paragraph One', journalist Mohammad Aghazadeh in Tehran and economic reporter Mahtab Gholizadeh in Germany discussed the outlook for Iranian citizens, which you can also listen to here. Mohammad Aghazadeh says the current situation in Iran has created a kind of 'displacement'; sellers are anxious about selling their goods, and buyers are trying to convert all their money into goods. Aghazadeh states that his retirement salary is 22 million tomans, which, when calculated at today's dollar price, means he has lost 50% of his purchasing power in the past four months. According to Aghazadeh, raising the dollar price is the government's wish to compensate for the budget deficit for paying wages, and people have become accustomed to the rising dollar price and do not react to it. Observations from this journalist indicate that for many workers and wage earners, it no longer makes sense to leave home and go to work when they have to spend two-thirds of their income on commuting. As a result, many industrial companies and production centers are facing a shortage of labor. However, Mahtab Gholizadeh refers to the subsidy policies of the Islamic Republic governments and believes that the prices of food items in Iran are determined by a combination of Nima currency and preferential currency. This economic journalist says that in the 1404 budget, the allocation of preferential currency for essential goods has decreased from 15 billion dollars to 12 billion dollars, indicating a reduction in government support in the pharmaceutical and food sectors. Gholizadeh mentions changes in the Nima currency in recent months, which has risen from 40,000 tomans to over 68,000 tomans. She also considers the reason for the dollar price increase to be inflation resulting from the budget deficit, government borrowing from the central bank, or excessive withdrawals from banks, which has exacerbated the ambiguous and suspended situation and the continuous increase in the exchange rate and its multiple rates. However, Aghazadeh argues that issues like inflation and the increase in the dollar price in Iran cannot be interpreted with economic formulas and that 'realizing rates' in Iran without considering 'the previous, myths, and illusions' is futile. According to Aghazadeh, governments in Iran do not have normal foreign and domestic policies and are expensive to manage. He states that the largest consumers of goods in Iran are state-owned and military and law enforcement entities that pressure the government to increase their budgets, and the government prints money for this purpose. Aghazadeh points out the issue of capital flight from Iran, stating that those who benefit from this inflation do not reinvest it in the country's production cycle but instead buy homes and invest abroad, such as in Turkey. Gholizadeh critiques Aghazadeh's statements by asking, 'If economic formulas do not work, then what formula is effective?' According to this economic journalist, no matter how little dollar enters the country and how limited its sources are, financial markets will still follow their own paths, and interventionist policies and government manipulations cannot determine the value of assets. She cites security confrontations, the execution of market activists under titles such as the Sultan of Coins and Currency, and government currency injections as evidence that Iran needs economic policymaking. Gholizadeh believes that the distribution cycle and subsidy policy to control inflation are doomed to failure due to resource shortages and sanctions. However, Aghazadeh believes that when an economy is affected by a political-regional movement, economic policymaking becomes meaningless. Referring to Gholizadeh's comments about subsidies, he states that there have been 'misunderstandings' in this regard. According to this journalist, the largest subsidy paid in Iran is the one that wage earners give to the government and employers, and if wage rates are made realistic and subsidies are eliminated, 'the government will go bankrupt immediately.' Aghazadeh also states that the central bank feeds the currency exchange network and questions who agrees on the negotiated currency except for petrochemical companies, steel producers, and exporters who have a hand in rent-seeking. Aghazadeh discusses a 'mechanism' in Iran that creates 'false wealth through wage suppression' and believes that the government, by 'manipulating' the dollar price from, for example, 92,000 tomans to 90,000 tomans, pretends that the market has calmed down. Gholizadeh states that the energy subsidy is the largest subsidy the government pays, ranging between 100 to 120 billion dollars. This economic journalist considers the rejection of negotiations with the US by all government branches in Iran to be a factor in increasing economic pressures on the people.