Iran signals fuel price hike as IMF projects 5.4% GDP contraction in 2026
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Iran's government is preparing the public for another fuel price increase as it struggles to afford subsidies for its 93 million people. President Masoud Pezeshkian said authorities are doing their best to shield citizens from hardship while the enemy works against them. The IMF projects Iran's GDP will contract by 5.4 percent in 2026.
Key Facts
- The IMF predicts Iran's GDP will contract by 5.4 percent in 2026.
- The Iranian rial hit a new all-time low of 2 million rials per US dollar in Tehran's open market on Sunday afternoon.
- President Masoud Pezeshkian said his administration pays 1.3 million rials (65 US cents) per litre of petrol produced by refineries.
- The lowest price tier offered to the population is 15,000 rials (less than 1 cent) per litre.
- Authorities cut the quota for the second fuel category from 100 to 70 litres at the start of the current calendar year, then to 50 litres after fighting erupted in July.
Fuel Subsidy Burden
Iran's government is preparing the public for another increase in fuel prices as it attempts to buoy the country's ailing economy. With the United States' siege of Iran's seaports and the economic impact of the war continuing, the offer of heavily subsidised fuel to the country's 93 million population is a burden that the government is struggling to afford. President Masoud Pezeshkian said his administration pays 1.3 million rials (65 US cents at the current rate) per litre of petrol produced by refineries. The lowest price tier offered to the population is 15,000 rials (less than 1 cent) per litre (0.26 gallons). Two other price categories for personal vehicle use – one at 30,000 rials (1.5 cents) per litre and the third at 50,000 rials (2.5 cents) – are also eating into the government's finances.
Public Unrest Risk
Hiking the price of petrol in this oil-rich country has already sparked unrest before, including nationwide demonstrations in 2019. Such measures also preceded the January 2026 protests by several weeks. Authorities are treading carefully, with a final decision expected over the coming weeks. President Masoud Pezeshkian said during a speech on Sunday morning, "I understand that we have many problems in society now. We are doing our best so the people are not afflicted, but the enemy is doing its absolute best so we won't succeed."
Economic Pressure
After US President Donald Trump threatened to target Iran with the "most crushing economic operation" ever undertaken against any country, the Iranian rial hit a new all-time low of 2 million rials per the US dollar in Tehran's open market on Sunday afternoon. The International Monetary Fund predicts that Iran's gross domestic product (GDP) will contract by 5.4 percent in 2026. From the start of the current calendar year in late March, authorities cut the quota for the second category from 100 to 70 litres. After two weeks of fighting between Iran and the US erupted again in July over the Strait of Hormuz, this allowance was cut again to 50 litres.
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Iran signals fuel price hike as IMF projects 5.4% GDP contraction in 2026
