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Thursday, 3 September 2026dailybeirut.com
Economy
Iran enters a new phase of its economic crisis as the government admits budget deficits are forcing it to print money, amid declining oil exports and foreign trade under sanctions, with inflation worsening domestically.
Iran is entering a new phase of its economic crisis, after the government admitted that budget deficits are pushing it to print money, at a time when oil exports and foreign trade are declining under the pressure of sanctions and blockade, and inflation is worsening within the country.
Nasser Hedayat, Deputy President for Executive Affairs, said budget imbalances and the banking sector have become major drivers of rising prices, with food inflation reaching 123%, adding that budget imbalance forces the government to print money to compensate for the deficit, and that increased money supply fuels inflation.
He also attributed 67% of inflation to bank performance, pointing out that some banks granted non-recoverable loans against collateral that did not reflect their actual value, before turning to the central bank for liquidity.
According to the Iranian official, inflation across economic sectors ranged between 30% and 80%, while food inflation reached 123%. He attributed part of the surge in food prices to a change in the exchange rate used to finance imports, from 28,500 tomans to 140,000 tomans.
There is no specific threshold of deficit that compels governments to print money, but resorting to creating new liquidity begins when revenues, borrowing, and other funding sources tighten.
In Iran, the central bank is responsible for issuing currency, while banknotes are actually printed by the Security Printing Organization and the mint under it in Tehran. However, financing the deficit does not always require operating printing presses; it can be done through increasing liquidity and credit within the banking system.
Funding deficits through the central bank is not a new development in Iran’s economy. The World Bank previously noted that government deficit financing and directed lending were linked to increased borrowing by banks from the central bank, amid structural problems affecting the banking sector, including high levels of non-performing loans and weak capital adequacy.
According to World Bank data, Iran’s monetary base grew by 42.3% during the fiscal year 2022–2023, before slowing to 28.1% the following year. The bank stated that constraints on bank budgets, government deficit financing, and directed lending programs increased banks’ reliance on the central bank.
The current government acknowledgment comes as the International Monetary Fund estimates Iran’s net government borrowing equivalent to 5.2% of GDP by 2026, according to the April (April) release of its "Fiscal Monitor" report.
Oil Under Blockade
Alongside internal imbalances, Tehran’s ability to export oil—its main source of foreign currency—has declined. According to Reuters, citing shipping tracking data from companies, Iranian crude shipments collapsed from around two million barrels per day in March (March) to just between 220,000 and 255,000 barrels per day in August (August).
The agency reported that the U.S. maritime blockade, which began disrupting exports more significantly since mid-July (July), has had an impact on crude shipments that years of sanctions alone could not achieve, as Iranian tankers struggle to leave the region and refill floating inventories near Asian markets.
Iranian President Masoud Pezeshkian also said that his country’s exports and imports have declined by about 35% due to sanctions and the maritime blockade, while the rial has surpassed one million rials per dollar, and annual inflation reached 66% in July (July), according to Reuters.
In August (August), the U.S. Department of the Treasury launched a new campaign named "Operation Economic Outcast," with Treasury Secretary Scott Bessent stating its goal was to cut off financial and commercial channels used by the Iranian regime worldwide.
Four days later, Washington targeted banking channels it claimed helped Tehran access the global financial system and the dollar.
Bessent later told Reuters that Washington expects to impose additional secondary sanctions on Iran weekly, with initial focus on financial institutions dealing with Iranian funds.
The tightening economic pressure coincided with a new round of military operations. On September (September) 1, the U.S. command announced strikes targeting Iran’s air defense systems, radars, naval capabilities, and communication facilities, while Tehran responded with attacks on American bases and sites in the region, according to Reuters.
