Protests broke out among shopkeepers in central Tehran on Sunday after a sharp slide in the rial, with videos sent to Iran International showing crowds chanting antigovernment slogans.
Mobile phone traders gathered outside the Iran Mobile Center and the Alaeddin Mobile Shopping Center on Hafez Street in central Tehran, according to eyewitness accounts and videos sent Iran International.
An eyewitness said the chants began with shopkeepers, with passersby later joining in on Jomhouri Street near the Hafez underpass on Sunday.
Reports also circulated on social media of protests at Tehran’s Charsou mall.
Separately, iron market traders in Tehran stopped work on Sunday morning, closing their shops to protest the rial’s decline, according to reports on social media.
The protests come as Iran’s rial weakened to new historic lows on Sunday, falling to about 1,445,000 per dollar, 1,700,000 per euro and 1,950,000 per pound, according to Tehran's open market rates.
A day earlier, the rial was trading at about 1,370,000 to the dollar. About a month earlier, it was valued at around 1,140,000 per dollar on the open market.
In recent months, runaway inflation and the rial's declining value have added to concerns over worsening economic conditions in Iran.
Over the past year, prices of food items in Iran have risen by an average of more than 66 percent, according to official data.
Iran’s Statistics Center said on Saturday that year-on-year, or point-to-point, inflation rose to 52.6 percent.
Hadi Kiadaliri, vice president of Iran’s Forestry Association, said studies show the country now holds the global record for soil erosion, a problem he attributed to unsustainable land use, water-intensive agriculture and weak integration of environmental limits into economic planning.
“Based on the results of one study, restoring soil fertility in the Zagros would require allocating 50% of annual oil income,” Kiadaliri told ISNA news agency, calling the cost a measure of how deeply natural capital has been depleted.
The Zagros range stretches across western Iran and underpins large parts of the country’s water cycle, biodiversity and rural livelihoods. Environmental experts have long warned that erosion, deforestation and overgrazing in the region threaten food security and increase flood and drought risks.
Kiadaliri said Iran’s development path had relied heavily on expanding agriculture despite the fact that about 93% of the country is classified as arid or semi-arid.
Between 2004 and 2020, he said, farmland expanded by around 3.6 million hectares, largely at the expense of forests and rangelands – an average loss of about 500 hectares of natural land per day.
Water resources have also been overexploited to sustain agricultural output, he said, arguing that food security had been narrowly defined as supply rather than resilience. “Environmental resilience is part of food security,” Kiadaliri said, adding that ignoring it has undermined long-term productivity.
He said international experience shows that environmental protection and economic development are not mutually exclusive, pointing out that no highly developed country has achieved sustained growth while degrading its natural environment.
Iranian officials have increasingly acknowledged environmental stress as climate change, drought and land degradation intensify.
The Department of Environment has recently pushed to formally value ecosystem services – such as water regulation, soil protection and carbon storage – a step Kiadaliri said could make environmentally damaging projects economically unviable once their true costs are accounted for.
“If ecosystem services are properly valued, many projects will no longer make financial sense,” he said, arguing that such accounting could curb further environmental damage.
Environmental groups say without structural changes in land management, water use and development planning, Iran’s soil erosion will continue to accelerate, raising long-term economic and social costs far beyond the immediate price of restoration.
Authorities say emergency dredging of the Ashouradeh channel in recent years helped restore limited water flow, reduce salinity and prevent the bay and the nearby Miankaleh wetland from drying out completely.
But experts caution the measures have only bought time, leaving the fragile ecosystem vulnerable to continued retreat of the Caspian Sea, disrupted natural inflows and renewed sedimentation.
Saeed Rasouli, head of Iran’s Ports and Maritime Organization, said studies carried out by the agency showed that pumping water from the Caspian Sea into the bay was a necessary parallel step to dredging, but the plan has not yet been fully implemented.
He said updated engineering assessments were under way to determine how much of the current degradation is due to reduced depth, falling sea levels or new sediment layers.
Officials say feasibility studies have confirmed that installing pumping stations could help sustain the bay for at least the next 20 years, but the project remains stalled pending further technical work and implementation by the energy ministry.
Rasouli added that Iran had urged greater regional cooperation at a recent Caspian Sea meeting, warning that the shrinking bay reflects a broader environmental challenge shared by all five littoral states.
“When people are struggling with livelihoods, you cannot govern,” Pezeshkian told the open session. “They say increase wages; someone tell me where I should bring the money from?”
The draft budget submitted to parliament proposes a 20% rise in public-sector wages, while expanding income-tax exemptions to soften the hit from inflation, which has remained among the highest in the world.
Pezeshkian acknowledged the increase “is not proportionate to inflation,” but said the government had tried to compensate by raising tax-free thresholds.
Under the proposal, salaried workers earning up to 400 million rials a month (about $282) would be exempt from income tax, while those earning between 400 million and 930 million rials ($282–$655) would pay a 10% rate, according to figures cited by Iranian media.
Pezeshkian said the budget’s main aim was to reduce what he called “the fire of inflation” and avoid a deficit that fuels money creation. He said the government had raised its own current spending by only 2%, cutting what he described as nonessential lines and moving toward “performance-based budgeting,” under which ministries would have to specify services to receive funds.
Parliament Speaker Mohammad Bagher Ghalibaf said the budget’s wage assumptions needed further work, warning that household livelihoods were at stake.
“The importance of the budget is clear for all of us … the budget is people’s lives,” Ghalibaf told lawmakers, adding that the 20% wage increase “has its problems and needs to be corrected.”
Lawmakers warn currency slide and subsidy policy risk stoking prices
Several lawmakers used the debate to attack what they described as a lack of credible plans to stabilize the currency and contain inflation.
MP Mohsen Zanganeh said advisers to Pezeshkian believed the exchange rate would rise in line with inflation, which he said implied a roughly 40% increase by the end of the next year.
“Mr. Pezeshkian, your economic team has accepted that it does not have the ability to reduce inflation and control the currency rate, and therefore it is only seeking to give vouchers,” Zanganeh said.
Jabbar Kouchakinejad, a deputy head of parliament’s budget committee, said officials appeared unwilling to curb the exchange rate’s rise and suggested the government might be using hard-currency sales to plug fiscal gaps.
“It seems there is no will in the government to control the exchange rate and balance it,” Kouchakinejad told ILNA, adding: “This trend is continuing quickly and prices are rising rapidly.”
Pezeshkian said the government planned to expand targeted support, including a consumer voucher program, arguing that price swings in the currency market feed directly into household costs.
The government spent about $6 billion importing gasoline this year and had budgeted around $8 billion for subsidized foreign exchange for essential imports next year, while many goods were effectively priced at the market rate, according to the president.
He also pointed to energy subsidies as a core distortion, arguing that higher consumption channels more state support to wealthier households. He described the system as inequitable.
Iran has recently introduced a three-tier gasoline pricing system, keeping subsidized rates while adding a higher tier aimed at limiting subsidy costs and discouraging non-card refueling and quota overuse, a move officials have presented as gradual reform after past price hikes triggered unrest.
The budget deliberations come as Iran’s economy faces chronic inflation, sanctions pressure, and financial constraints that officials say limit room for maneuver, even as the government argues it is trying to protect lower-income households through tax exemptions and targeted aid.
The rial slid on Sunday to a new record low of 1,420,000 per dollar, as point-to-point inflation ran at over 50% and the central bank reported the economy had contracted despite a modest rise in oil output and sales.
Fresh central bank data showed gross domestic product shrank by 0.6% including oil and by 0.8% excluding oil in the first six months of the year 1404 (started on March 21), reflecting weak demand, falling investment and heightened uncertainty across the real economy, Tasnim reported.
The downturn came despite modest growth in the oil sector, which expanded by 1.1% but failed to offset deeper declines elsewhere.
Agriculture contracted by 2.9% and industry and mining by 3.4%, while construction suffered a sharp 12.9% slump, the central bank said, pointing to a deepening recession in a sector that is a key engine of employment and related industries.
At the same time, inflation pressures intensified. The statistics center said point-to-point inflation rose to 52.6% in the month to late December, up 3.2 percentage points from the previous month, while average annual inflation climbed to 42.2%.
Food inflation was far higher, with prices of food, beverages and tobacco up 72% year-on-year, compared with 43% for non-food goods and services. Monthly inflation reached 4.2%, led by sharp increases in staples such as dairy and bread.
The deteriorating data frame a contentious budget debate in parliament, where Pezeshkian has warned that the state lacks the resources to cushion households fully from price rises.
“They tell me to raise wages, but someone should tell me where the money is supposed to come from,” he told lawmakers while defending the draft budget, which proposes a 20% public-sector pay increase – well below inflation – alongside broader tax exemptions.
Pezeshkian has said the priority is to prevent a deficit-fueled surge in prices by restraining spending growth and tightening fiscal discipline.
“An orderly budget without a deficit reduces the fire of inflation and can contain price rises to some extent,” he said, adding that the government would expand tax exemptions and roll out targeted subsidies to protect low-income households.
Parliamentary leaders and lawmakers from across factions have pushed back, arguing the budget risks aggravating inflation and living costs.
Some lawmakers have been more blunt. “The 1405 budget has an inflationary nature,” said Hossein Samasami, a member of parliament’s economic committee. “Budget decisions are among the most important drivers of prices and inflation, and ignoring their impact directly weakens purchasing power.”
Volatility in the currency market has added to the pressure. The rial has fallen sharply in recent weeks, fueling gains in gold and hard assets as households seek protection from inflation.
Guards-linked Tasnim news agency said in an analysis on Sunday that the dollar had become “a symbol of lost confidence,” criticizing what it described as inaction by the government and central bank as expectations worsened.
Markets have continued to test policy credibility. On Sunday, the rial weakened to a new record low of about 1,420,000 per dollar.