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Iran’s budget will increase social welfare spending

Monday, February 20, 2023

Significance

The expansionary budget increases social welfare spending significantly above the present inflation rate, highlighting the government’s concern that worsening economic conditions could trigger further protests. Funding for the security services also rises sharply, albeit at less than the rate of inflation, reflecting elevated internal and external threats.

Impacts

  • The rial will come under further pressure over the next twelve months, boosting imported inflation.
  • The substantially increased budget spending will also add to price pressures.
  • Deteriorating standards of living could result in sporadic anti-government protests.
  • If US sanctions successfully target Iran’s oil exports, the government will have to cut back its spending plans.

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