President Pezeshkian’s unveiling of this year’s national budget, delivered on December 28, 2025, was anything but business as usual. As he addressed lawmakers and the public, he painted a picture of a nation weathering multiple storms: the most severe drought in fifty years, a pronounced slump in global oil prices, intensified sanctions, and relentless economic pressure from foreign adversaries. "This year’s budget process was markedly different from previous years," Pezeshkian stated, underscoring the extraordinary circumstances shaping every fiscal decision.
The president was candid about the challenges. “When people are struggling with livelihoods, you cannot govern,” he told parliament in an open session, according to Iranian media. It was a frank admission that the government’s legitimacy and effectiveness hinge on its ability to shield citizens from economic hardship. With inflation among the highest in the world, the stakes could hardly be higher.
To address these crises head-on, the government is rolling out a nationwide commodity voucher program designed to stabilize the cost of living. Pezeshkian explained, “The government will implement the plan to ensure the prices of essential goods remain stable for all segments,” promising that any price increases would be absorbed by the state itself. The aim is to keep basic necessities within reach for everyone, no matter how rough the economic seas get.
But the president’s plan doesn’t stop at food vouchers. Recognizing the disproportionate burden inflation places on the country’s most vulnerable, the budget includes sweeping tax reforms. Low-income individuals will be exempt from income tax entirely, while mid-level earners will see their rate capped at just 10 percent. Specifically, salaried workers earning up to 400 million rials a month—about $282—will pay no income tax, and those earning between 400 million and 930 million rials ($282–$655) will be taxed at the 10 percent rate. Pezeshkian acknowledged that the proposed 20 percent rise in public-sector wages “is not proportionate to inflation,” but said the government had tried to make up the difference by raising tax-free thresholds and expanding exemptions.
Retirees, often hit hardest by rising prices, are also in line for relief. Retirement pensions will see an average growth of 36 percent, a significant increase intended to help older citizens maintain their purchasing power. To further ease the strain on household budgets, the government is allocating funds from value-added tax (VAT) revenues directly to support living costs.
Social welfare is a recurring theme in the new budget. Major increases have been earmarked for maternal support, student nutrition, school transportation, and healthcare services—especially in underprivileged provinces where the social safety net is stretched thinnest. According to Pezeshkian, these targeted investments are designed to “protect citizens’ welfare and ensure social equity” even as the country navigates what he called economic “storms.”
Yet, the president also faced tough questions about the sustainability of these ambitious measures. “They say increase wages; someone tell me where I should bring the money from?” Pezeshkian asked, voicing the dilemma at the heart of the budget debate. The government’s answer has been to keep its own current spending growth to a mere 2 percent, cutting what the president described as nonessential lines and moving toward performance-based budgeting. Under this new approach, ministries will need to specify the services they provide in order to receive funding—a move designed to boost accountability and squeeze more value from every rial spent.
Despite these cost-saving efforts, not everyone is convinced the numbers add up. Parliament Speaker Mohammad Bagher Ghalibaf, a key figure in the legislative process, warned that the budget’s wage assumptions “needed further work,” cautioning 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 his fellow lawmakers. He added that the proposed 20 percent wage increase “has its problems and needs to be corrected.” His remarks reflect a broader anxiety among policymakers: how to balance the urgent need for relief with the risk of fueling inflation or running a deficit that could spark even more economic pain down the line.
Pezeshkian, for his part, insisted the main aim of the budget was to “reduce the fire of inflation” and avoid a deficit that would force the government to print money—a recipe for disaster in a country already grappling with rapid price increases. The president’s team believes that by expanding tax exemptions, boosting pensions, and carefully targeting subsidies, they can provide a lifeline to ordinary Iranians without worsening the country’s fiscal position.
Still, the context in which these decisions are being made is nothing short of daunting. The worst drought in half a century has devastated crops and strained water supplies, adding to the cost of living for millions. The sharp drop in global oil prices has slashed government revenues, while sanctions and foreign pressures have made it harder to access international markets and attract investment. Against this backdrop, every rial in the budget must work harder than ever before.
To help offset these pressures, the government is also looking to performance-based budgeting—a strategy that’s gained traction in other countries facing fiscal crunches. By tying funding to specific outcomes, officials hope to cut waste and ensure that every department delivers real value to citizens. It’s a pragmatic shift, but one that will require a cultural change across the public sector.
For many Iranians, the details of budget allocations and tax rates are less important than the bottom line: Will life get any easier in the months ahead? The government’s promise to stabilize prices, protect the vulnerable, and invest in social services offers hope, but there’s no denying the road ahead is steep. As Pezeshkian himself put it, unity, military sacrifice, and leadership guidance have helped the country weather past crises—and they’ll be needed again as the nation faces its latest round of challenges.
In the end, the new budget is more than a collection of numbers and policy tweaks. It’s a statement of intent—a commitment to shield citizens from the worst effects of economic turbulence, even when the solutions are imperfect and the resources are stretched thin. Whether these measures will be enough to “reduce the fire of inflation” and restore stability remains to be seen, but for now, the government is betting that targeted relief and fiscal discipline can keep the country on course.
