Bedeviled by government mismanagement of the economy and international sanctions over its nuclear program, Iran is in the grip of spiraling inflation. The local currency, the rial, has lost 50% of its value in the last year against other currencies. The price of bread has increased 16-fold since the withdrawal of state subsidies in 2010. On June 28, an Islamic Revolutionary Guards official admitted in an interview with the corps‘ own publication, Sobh-e Sadegh, that the government had been late in paying soldiers their wages.
Economists say much of the damage to the economy has been self-inflicted, as the Ahmadinejad government went on an import spending spree after oil revenues started hitting record levels from 2005 on. With the government buying so many goods from abroad, many domestic producers were forced to lay off workers and close factories. Yet Tehran still appears to be thriving; Porsche sold more cars there in 2011 than anywhere else in the Middle East, and supermarkets and stores brim with imported products.