Over the past two decades, Iranian households have witnessed a steady erosion of their economic welfare. While inflation and poor policy are often cited as the main culprits, a deeper analysis reveals that systemic corruption and chronic misallocation of resources have critically undermined public prosperity.
Falling Incomes, Rising Prices
The Sen Welfare Index, measuring both income and its distribution, has steadily fallen. From 2002 to 2021, and according to official data, the welfare index for urban households declined by an average of 1.5% annually, and rural households fared worse, seeing a 3.7% annual drop. Despite nominal income growth, real incomes and real expenditures both fell, eroding consumption capacity and living standards.
According to official state figures, the consumer price index surged by 2,289% during this period, while nominal urban incomes rose by 2,287%. However, real incomes did not keep pace. Urban households experienced a 26.8% decline in real expenditures over the period, while rural households suffered even sharper contractions. Given the political sensitivity and reporting practices in Iran, the actual deterioration in living standards may be even more severe than these figures suggest. The data underscores a profound loss of purchasing power, despite headline income increases.
#Iran’s 2025 Budget: Prioritizing Propaganda, Security, and Religious Institutions Over Public Welfarehttps://t.co/SRfrZfJxDa
— NCRI-FAC (@iran_policy) February 20, 2025
Corruption and Misallocation
Financial mismanagement compounded the economic pain. In 2024, it was revealed that Bank Karafarin had issued 147 large loans totaling nearly 3 trillion tomans, with over 2.2 trillion tomans classified as “non-performing loans.” One example, PetroTar Offshore, received significant loans despite having no visible business operations. “Today, there is no sign of activity from this company,” reported Iranian media.
Corruption extended into public services. Former Tehran City Council member Mahmoud Mirlohi accused Mayor Zakani’s administration of misusing approximately 150 trillion tomans. “Neither the bus fleet was upgraded, nor new metro cars were added,” Mirlohi said. Despite a massive budget, even municipal salaries were delayed, raising sharp questions about fund disappearances.
In 2024, Iran’s state broadcaster IRIB received a budget of 43 trillion tomans—equivalent to the budgets of ten major ministries combined. As Hamid Mirzadeh, former president of Azad University, lamented, “The policies of IRIB do not reflect the majority’s will, leading to a shift in media authority outside the country.”
#Iran News in Brief
In a startling revelation, Ali Soufi, former Minister of Cooperatives, Labor, and Welfare during President Khatami's tenure, admitted the recent $3,7B financial fraud exposure is politically motivated.
Speaking on the Debsh Tea #Embezzlement case, Soufi… pic.twitter.com/o14EP2liIr— NCRI-FAC (@iran_policy) December 16, 2023
The scale of financial mismanagement is staggering. According to the Iranian Tax Authority, approximately 7 quadrillion tomans in credit were injected into the economy in one year alone. Yet, “lack of access to financial resources” remained a top complaint among Iranian producers. “Despite injecting this vast amount of resources, they did not reach where they were supposed to,” officials acknowledged.
Collapse and Consequences
The result has been predictable: capital flight, a collapse in private sector investment, widening rural-urban inequality, and a surge in brain drain. Mehdi Toghyani, Deputy Chairman of the Parliament’s Economic Commission, noted, “An unstable economy, where inflation and exchange rates fluctuate constantly, drives investors away from productive sectors.”
The persistent decline in Iranian household welfare cannot be explained by macroeconomic factors alone. Widespread corruption, reckless mismanagement, and systematic misallocation of national resources have critically weakened Iran’s economic foundation. Without sweeping governance and financial reforms, the trend of declining welfare will only deepen, threatening not only economic stability but the social fabric itself.