The Iranian Rial has been facing immense pressure in recent years, with the currency experiencing a freefall in value against most foreign currencies. As the Rial continues to lose its value, its purchasing power and, thus, the quality of life for millions of Iranians decline further. This article will, therefore, discuss the impacts of the current situation where the Iranian Rial has greatly reduced its purchasing power. We will talk about why it is declining and what that means for Iranian society.
Understanding the Purchasing Power of a Currency
Purchasing power is the value of a unit of currency expressed in terms of the quantity and quality of goods and services it can purchase. When a currency is strong it means that the purchasing power is strong because it costs a lot less to buy goods and services or vice versa. However, when a currency value is low people find it hard to buy things because they need to spend a lot of money.
In Iran, for instance, the fluctuating value of the Rial has triggered a very fast decline in the buying power. High inflation rates of basic consumer products, low living standards, and hard living conditions are characteristic of life for most Iranians.
The Factors Behind the Diminishing Purchasing Power of the Iranian Rial
Such issues have made it hard for the Iranian Rial to maintain its purchasing power, and it has been constantly depreciating for the following reasons. These issues are connected and have accumulated over the years, and in this sense, they have formed a perfect combination of economic difficulties for the Iranian people.

1. Economic Sanctions
   The United States, with other members of the global community, has been able to impose economic sanctions that have led to the decline of Iranian Rial. Some of these measures, especially those regarding oil export and money transfer have limited Iran’s access to foreign currency, majorly dollars.
   Impact of Sanctions on the Iranian Economy
   Iran has always relied on the export of oil and gas as its dominant export, and source of foreign exchange earnings. This indeed did happen but following the withdrawal of the U.S. from the JCPOA in 2018 and subsequent re-imposition of economic sanctions, Iran’s oil exports nosedived. This cut in revenue on oil hit hard the amount of foreign currencies Iran had, leading in turn to further pressure on the Rial.
   Besides oil exports, the more general measures have limited Iran’s maneuverability in normal commercial affairs, including businesses’ import of essential goods and the government’s access to foreign funds. As a result, Iran has a natural shortage of foreign currency due to a reduction in the value of the Rialriyal with its declining purchasing power.
2. Inflationary Pressures
   Another factor influencing the devaluation of the Iranian Rial’s buying power is inflation. Where inflation is high prices of goods and services in the market are often driven up whereas people’s remunerations for wages or income usually lag far behind. In such an environment the value of the local currency goes down hence the currency rate makes it so costly for people to afford even simple things like food and shelter.
   The Role of Inflation in Depreciation
   The inflation rate in Iran is not very stable and has changed erratically over the past few years, but its figures always have double-digit numbers. In 2022 it was at approximately 50% inflation an incredibly high rate that eroded the value of the Rial from the general public’s purchasing power. Inflation (the price of goods and services in Iran have gone up too therefore the Iranian people need to spend more of their income to maintain the same level of consumption they were used to do).
   Several reasons have been identified as to why Iran has faced the challenge of a high inflation rate. These include exchange rate depreciation, an increase in imported goods’ prices, and the expansion of fiscal policies. While its exchange rate continues to depreciate – the Rial—the price of imported products in the country increases, which causes some of the essential commodities such as food, fuel, and medicine to hike their prices.
   Government Response and the Inflation Spiral
   In a bid to deal with the economic Hera problem, the Iranian government has, from time to time, opted for the procedural method of printing even more money. At one point, this may be a solution, but it puts inflation rates up in the long term. Because more money floods the economy resulting from oil revenues, and with little corresponding increase in goods and services available, the value of the Rial continues to fall in terms of BPD, and the inflation cycle deepens. Cyclically, inflation and currency devaluation lead back to each other; thus, the people of Iran lose their purchasing power.
3. Political Instability
   The use of Rial and even its depreciation depends on the political system in Iran. Uncertainty in domestic political stability together with political stability concerning counterparts affects investors’ risk tolerance in the Iranian economy, due to capital flight and differential foreign investment breaks.
   Impact of Political Uncertainty
   The political systems in Iran have made it almost impossible for investors to feel comfortable within the nation’s borders. In this case, economic mismanagement, corruption, and instability of the legal framework become the main obstacles to business development. As a result, economic growth has stagnated and so is the Iranian economy less robust than before.
   Also, domestic political instability and political demonstrations against the government and its measures about the economy have made the situation worse. They usually occur due to dissatisfaction with with economic status, inflation, rate of unemployment, and poverty as well as salary disparities. When the citizens’ confidence in their government declines, consumers start using less Rial, and as a consequence, its value goes down, and its purchasing power shrinks.
4. Dependency on Oil Exports
   As a major non-Arab supplier of oil, Iran earns a good proportion of its revenues from exporting this product. This paper has highlighted, like any other country, Iran’s economy is sensitive to oil prices. The Iranian Rials value, as well as its purchasing power, follows the change in oil prices.
   The Vulnerability of an Oil-Dependent Economy
   Depending on current global oil prices, Iran’s foreign currency reserves will be reduced, and, as a consequence, the value of rials will decline. What makes it worse is that Iran has also been caused by sanctions that have limited their exports of oil. Due to a lack of funds from oil exports, Iran has no option but to produce more money, which only increases inflation and devalues the Rial. Because oil prices are unpredictable, the Iranian economy continues to crumble, thus causing a decline in purchasing power.
5. Structural Economic Issues
   Other factors affecting the Iranian economy include sanctions, inflation, and political instability, as well as other issues emanating from the structures of its economy, which has led to a weak Rial and low purchasing power. These are corruption, poor state performance, especially in state-owned enterprises, and dependence on the oil sector.
   The Role of Corruption and Mismanagement
   Political and economic corridors of power are widely exposed to corruption in the Islamic Republic of Iran. The state lacks accountability for the management of its resources, thus marginalizing attempts at economic stability. SOEs are most of the time unprofitable, and the economy suffers from too much red tape, making it hard for organizations to run effectively.
   The result is a depressing economic growth rate, which is hard to break free of, signifying low employment rates and low wages for the common man. The relation with this is it also has to do with the buying power of the Iranian Rial since wages cannot keep up with inflation and, therefore, cannot keep up with the cost of living.
   Lack of Economic Diversification
   Iran’s economy is reliant on oil and gas exports, hindering attempts to diversify the economy. Nonetheless, the nation has always boasted of manufacturing, agriculture, and service sectors, while the oil industry has stagnated the growth of other sectors. In other words, the economy is not very diversified, and therefore, it is prone to changes in events within the international market (changes in the price of oil or carrying the sanction on the country, which then will immediately affect the value of the Rial).
   The Social Impact of Diminishing Purchasing Power
   The implications of this are social for Iranians as the Rial devalues further and further. Weeping, people live in fear of being unable to feed the family, pay bills, rent, etc. Because of inflation and devaluation of the Iranian Rial. As a consequence of these internal tensions, poverty levels have grown, the standard of living has decreased, and regimes have become dissatisfactory.
6. Rising Cost of Living
   It is no longer possible for most households to lead an acceptable quality of life because of ever-increasing costs related to the satisfaction of primary needs, which include food, shelter, and transport. Basic needs, such as bread, rice, oil, and others, remain unaffordable; thus, many families see themselves compelled to cut down on their intake.
   Besides food, the Iranian People pay the cost of health care and education as well, these burdens were added. As a result, many families have not been able to save, or invest; let alone get out of the poverty bracket entirely.
7. Unemployment and Job Insecurity
   The issue of cost and economic instability has risen through the roof and many businesses could not handle it which has led to unemployment. The nature of the job market in Iran is volatile and many people are struggling to get decent paid full-time employment. A problem such as the youth employment situation has remained an issue because many youths are out of jobs due to limited employment opportunities.
   This deepening unemployment challenge not only amplifies the existing economic difficulty in the country but also affects the ordinary Iranian. There is also a high probability which gives little chance of career promotion, which leaves people in a cycle of poverty that they cannot escape to a better standard.
8. Growing Wealth Inequality
   The loss of the value of the Rial in relation to the dollar has also led to increased inequality of wealth in Iran. While the rich people who can invest and have assets overseas are likely to sail through the storm, the ordinary Iranian is still grappling with inflation. This has not only raised dissatisfaction and social conflict but also nurtured political dissent and fury against the government.
9. Erosion of Social Cohesion
   As the problems escalated, the pressure on communities increased, resulting in separation and disbelief among Iranians. The generation of increased disparity between the rich and the underprivileged results in hatred, tension, and less social cohesion, as previously anticipated by sociologists. Those reciprocal bonds manifest themselves as extended families and neighbors who once could ‘ raspberry ‘ each other are unable to do so as resources diminish. The asocialization process leads to higher crime rates, disorder, and other indicators of social unrest.
10. Mental Health Crisis
    The long-standing economic crisis has helped to enhance the extent to which the overall Iranian population is plagued by mental health problems. Anxiety, depression, and stress have become rampant, with people unable to meet the basic needs of optimum living and lacking a positive outlook on the future. However, limited access to treatment also remains a great challenge since the financial blunt to mental health services is still very low, meaning that many individuals continue to live unhelped. Mental health issues are a problem in their own right. However, they have consequences in social lives, work, family, and more.
    Conclusion
    Though Iranian Rial’s purchasing power is sinking, this is a complex problem that has to do with internal and external factors. Violations, high inflation rates, political instability, and over-dependence of Iran’s export earnings on oil sales have contributed greatly and participated in devaluing the Rial and, hence, its purchasing power. The yesterday social consequences of this phenomenon have been seen in poverty, joblessness, and further inequality affecting millions of Iranians.
    As such, there are no miracle solutions to Iran’s economic problems, but addressing the root causes of Rial depreciation, including reducing corruption, diversification of the economy, and the receipt of sanctions relief, might help stabilize the currency and indeed give back to it its purchasing power in the future. Until then, Iranians will remain in the face of such shocking facts as the new Iranian Rial, which has been decreasing in value each day.