At the End of the Tunnel of Currency Collapse: Is the Fall of Iran’s Regime in Sight?

Runaway inflation and the collapse of Iran’s national currency have shaken not only the livelihoods of ordinary people but also the foundations of the regime itself, pushing it to the edge of collapse. This economic crisis is rooted in the regime’s aggressive policies—hostility toward Israel and the United States, its nuclear and missile ambitions, and the international isolation that has followed. These have severely devalued the currency, deepened poverty, and brought devastating consequences to Iran’s system of governance.

What has destabilized the regime more than anything else is spiraling inflation. It erodes the national currency’s value, weakens purchasing power, and drives poverty throughout society. Inflation is defined by chronic price instability and sustained economic disruption. Although the Islamic Republic outwardly claims to fight inflation, its survival depends on a corrupt, rent-seeking economic model that actually benefits from it. The regime uses inflation to both plunder national wealth and fund its costly regional aggression. Over the past 45 years, inflation has hollowed out the national currency—turning it into one of the weakest in the world, despite Iran’s immense oil and gas reserves. As a result, poverty has deepened, and much of the middle class has collapsed into economic despair.

Inflation and Taxation: Two Blades of the Same Scissors

In the eyes of the regime, taxation is less about public service and more about sustaining its rule. Its impact on ordinary citizens is minimal in terms of services, while primarily serving the regime’s financial needs. Together, inflation and taxation act like two blades of a pair of scissors—slashing people’s purchasing power and financial security. These tools help fund the regime’s militarism and anti-Western stance, placing a double burden on the population.

Warmongering as the Chief Obstacle to Economic Development

Rooted in medieval dogma and incapable of meeting the urgent economic and cultural needs of its people, the regime relies on foreign aggression and domestic repression to maintain its grip on power. But today, this warmongering strategy has become a noose around its own neck.

The regime’s militaristic doctrine rests on three main pillars: supporting proxy militias across the region, expanding its ballistic missile program, and advancing its nuclear ambitions

The High Cost of Anti-Western Hostility

In a system built on enmity toward the West, the people have no real voice—only the burden of growing poverty. The roots of Iran’s inflation crisis can be traced directly to domestic and foreign policies shaped by this hostile ideology.

Key factors include:

• The growing dominance of the IRGC, the Supreme Leader’s office, and their affiliated conglomerates in the economy, sidelining the private sector
• Deep institutional corruption
• Chronic budget deficits and reckless monetary expansion
• Massive ideological propaganda budgets
• Billions spent on missile development and nuclear pursuits, all at the cost of basic economic health
• Patronage networks and rent distribution both at home and abroad
• Wasted resources and severe mismanagement

These are the direct and indirect outcomes of the regime’s militaristic and ideological priorities.

The Historic Collapse of the National Currency

Economic data shows that between 1979 and 2025, the value of Iran’s national currency fell by about 99.99%. In real terms, one unit of currency in 2025 is worth just 1/10, 675 of its 1979 value. Over the same period, prices increased more than 10,600 times.

Meanwhile, the U.S. dollar has appreciated 13,570-fold in Iran—outpacing inflation itself. This gap is due to the rial’s plummeting value, rising uncertainty, capital flight, loss of trust in the currency, increased demand for assets like dollars, speculative behavior, and the flood of excess liquidity into informal markets like gold and foreign exchange.

Inflation: The Alarm Bell of Political Collapse

Although the regime has long exploited inflation for its benefit, the economy is now too damaged to recover. Inflation has become the death knell of the Iranian economy—and the collapse of the economy could soon lead to the collapse of the regime.

Although the regime has long exploited inflation for its benefit, the economy is now too damaged to recover.

A Historic Crossroads

The Islamic Republic now faces a defining choice: It must either retreat from its ideological positions—particularly its nuclear and missile ambitions and hostility toward the West—or face devastating consequences. Without change, Iran is likely to face military strikes that could destroy large portions of its nuclear, military, and even economic infrastructure. As foreign currency reserves shrink, GDP declines, national income collapses and structural crises deepen, both inflation and the dollar will skyrocket—accelerating the final unraveling of the economy.

Conversely, if the regime abandons its aggressive posture, the country could begin a path toward economic recovery by attracting investment, stabilizing the Rial, and restoring public confidence.

But even if the Islamic Republic were to choose to renounce its ideological dogmas, could it survive the anger of a people broken by more than forty years of repression, massacres and misery?

Hamid Enayat is a political scientist, specializing on the topic of Iran, who collaborates with the Iranian democratic opposition (NCRI).