Budget 2025: Iran’s Economic Balancing Act Puts Electronic Food Subsidies Center Stage
With just two months remaining until the submission of the national budget bill for the Iranian year 1405 (2025) to the Islamic Consultative Assembly, the Plan and Budget Organization is in the final stages of drafting the crucial document. This year’s budget preparation is marked by a distinct shift in priorities, moving from traditional fiscal concerns to a direct focus on household welfare through a major new social support initiative.
A Budget with a Social Mandate
Unlike previous years, where the primary focus was on bridging the budget deficit and securing stable tax revenues, the core directive for the 1405 budget is explicitly supportive. The central theme is safeguarding the purchasing power of households and the intelligent redistribution of subsidies. At the heart of this strategy lies the nationwide rollout of the monthly Electronic Grocery Card (or Food Subsidy) scheme, a project personally emphasized by the President.
The Central Dilemma: The Exchange Rate for Essential Goods
The government faces a critical and delicate decision that will define the upcoming budget: determining the official exchange rate for essential imported goods. This rate is a key variable that influences everything from import costs to final consumer prices.
- The Case for an Increase: Current inflationary conditions and the rising cost of imports are creating pressure to revise the longstanding rate of 28,500 tomans.
- The Case for Caution: Any increase, however, carries the direct risk of driving up the prices of basic consumer goods, placing additional pressure on household livelihoods.
A New Fiscal Rule: Subsidies First
This year, the resolution to this dilemma is bound by a strict presidential order. In a significant departure from last year’s policy, any and all additional revenue generated from a potential increase in the essential goods exchange rate must be entirely allocated to funding the Electronic Grocery Card program.
This means that even if the government decides to raise the rate to a range of 35,000 to 40,000 tomans, the fiscal impact on the general budget deficit will be neutralized. The extra funds will not be used to patch the budget shortfall but will be channeled directly into this supportive scheme, transforming a potential inflationary measure into a tool for public assistance.
Parallel Reforms: Streamlining Subsidies
Running parallel to the new program is the ongoing effort to make the subsidy system more efficient. The government is rigorously pursuing the removal of high-income households from the cash subsidy roster. Official reports indicate that approximately 6 million out of a targeted 18 million individuals have already been removed from the list of cash subsidy recipients, freeing up resources for more targeted support.
The Road Ahead
The final government policy on the essential goods exchange rate remains undecided. The Plan and Budget Organization now has the complex task of striking a balance between three core concerns: curbing inflation, ensuring sustainable financing, and protecting public welfare. The outcome of these decisions will not only set the framework for the 1405 budget but will also define the government’s economic direction for the second year of the Seventh Development Plan.