Iran will let some importers buy dollars at 285,000 rials — roughly one-fifth of the open-market rate — to bring in wheat, medicines and baby formula. The cabinet approved setting aside up to $3.5 billion in oil and gas revenue to fund the program and restart a subsidized exchange band for those essentials. The rate is far below the black-market dollar at about 1.55 million rials and reverses parts of a December budget plan that sought to remove the subsidized band. Why this matters: The move signals Tehran is opting for visible, short-term relief for households rather than pushing ahead with full currency liberalization. Tapping sovereign and oil revenues to stabilise imports could steady supplies now, but it narrows fiscal room and risks renewed distortions unless eligibility and oversight are tightened.

Policy U-turn under pressure

Iran's cabinet added a clause to the annual budget implementation guidelines that restarts a subsidized currency rate for a list of essential imports. The change will let a network of trustees purchase key goods using dollars priced at 285,000 rials each — a rate far lower than both the black-market dollar at about 1.55 million rials and the budget's earlier 1.23 million rials rate. The allocation will probably draw on up to $3.5 billion from Iran's share of oil and gas proceeds.

The move marks a partial reversal of a budget proposal from late December that aimed to remove the cheapest foreign-exchange band. At the time, Tehran argued the subsidized rate had fostered opacity and corruption without passing clear savings to ordinary shoppers. The withdrawal of that rate contributed to price jumps that officials now say left many households buying only necessities.

Who is affected and how

Households are the immediate focus. Officials singled out 11 categories of essential goods for the program, including staples and medical supplies. So people who rely on monthly electronic coupons and cash handouts should see more consistent availability of essentials, at least in the short run.

And those subsidies carry a fiscal cost. Redirecting up to $3.5 billion in energy revenue to import food and medicine reduces the funds available for other budget items. It also increases the state's role in allocating scarce foreign currency, concentrating purchase power in a set of trustees charged with importing and distributing those goods.

Mastheads

Economic signals and constraints

Restarting a cheap exchange rate for select imports signals a policy choice: stabilize physical supplies rather than pursue a full liberalization of the currency system. The gap between the official preferential rate and the open-market rate is large.

That gap creates economic distortions and gives room for arbitrage and misallocation unless controls on eligibility and oversight are tightened.

Officials have also said they're tapping the country's sovereign wealth fund to buy essential goods. That suggests Tehran is drawing down more than just near-term oil receipts to shield households from price shocks. But using sovereign assets for imports while the country faces sanctions and constrained export revenue may narrow fiscal options at a time when the economy already faces heavy pressure.

Political drivers

Policy makers cited public hardship as a key reason for the shift. Demonstrations by Tehran shopkeepers in December — which expanded into broader antigovernment protests — helped push the issue back onto the policy agenda. Hard choices on subsidies and currency management have political costs. So the government is weighing visible relief now against longer-term reforms it previously argued were needed.

Yaghoub Andayesh, a deputy at the Ministry of Cooperatives, Labour and Social Welfare, told state television that the removal of the cheaper exchange rate pushed up prices for essentials and that the ministry has presented scenarios to guarantee food security across the affected categories. He declined to give precise figures for how much prices have risen.

Supply chains and market behavior

Traders and shoppers are already changing behavior. Markets, cafes and shops in Tehran have reopened and some highways are busy again.

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The budget clause authorizes trustees to import essentials at 285,000 rials per dollar, tapping up to $3.5 billion in oil and gas proceeds.

This article was created with AI assistance.