Iran's Government Admits to Money Printing Amid Severe Inflation Crisis

In a candid admission, Iran’s executive deputy president, Mohammad Jafar Qaempanah, revealed that the government is resorting to money printing as a necessary measure to manage its budget deficit and the dysfunction within the banking sector. This acknowledgment comes as Iran grapples with an official inflation rate of approximately 52.6%, with food prices soaring by over 66% at times.

Qaempanah explained that about two-thirds of the inflation is attributed to imbalances in the banking sector, while the remaining third stems from the persistent budget deficit. The Iranian banking system has historically functioned as a quasi-fiscal entity, often extending credit in ways that blur the lines between monetary policy and government expenditure. Consequently, when banks lend beyond their deposits and reserves, the Central Bank intervenes, resulting in new money entering circulation without a corresponding economic output.

The budgetary situation is equally dire, with deficits exceeding 30% of planned figures since 2018. This ongoing shortfall reflects the government's struggle to balance revenue collection—heavily impacted by sanctions on oil exports—and its obligations to maintain subsidies and public sector spending. President Masoud Pezeshkian has directly linked the act of printing money to the erosion of purchasing power for ordinary Iranians.

In response to the crisis, the Pezeshkian administration has proposed capping overall budget expenditure growth at 2% for the fiscal year starting March 2026, marking a significant shift towards fiscal restraint. However, this cap, set against an inflation rate exceeding 50%, effectively represents a real-term cut in government spending.

Iran’s revenue base remains fundamentally compromised by international sanctions, particularly those affecting oil exports, which are crucial for its economy. While subsidies on essentials like fuel and food consume large portions of the budget, cutting them remains politically sensitive. The structural issues within the banking sector have persisted for decades, complicating the current administration's efforts.

As the rial continues to devalue, many Iranians are turning to alternative stores of value, such as gold, foreign currencies, real estate, and increasingly, cryptocurrencies, to safeguard their assets from domestic monetary policy and international sanctions.