Introduction: The agricultural sector holds a position of paramount importance in Iranian economy, owing to its role in satisfying domestic demand and generating foreign exchange earnings. Within this sector, horticulture is considered as one of the most significant sub-sectors, accounting for the highest share of agricultural exports in the country. Over recent years, certain regionally strategic horticultural products have attained a unique status, distinguished by their profound economic and social impacts compared to other agricultural outputs. As a strategic and high-yield crop, pistachio plays a substantial role in the socio-economic status of farmers in arid and semi-arid regions, primarily due to its remarkable resilience to drought and soil salinity. Furthermore, in the trajectory of agricultural development, the horticultural sub-sector (leveraging a comparative advantage in products such as pistachio) can serve as a primary catalyst for increasing the sector’s contribution to the Gross Domestic Product (GDP) and national foreign exchange revenues. Various policies have been adopted in Iran to support the agricultural sector, and their evaluation has important policy implications. This research aimed at examining how these policies were affected by macroeconomic policies, especially exchange rate policy. In Iran, various exchange rate policies have been implemented, which has resulted in the misalignment of the real exchange rate from its equilibrium value. In this research, the effects of the exchange rate misalignment on the indicators of support for producers and consumers of pistachio crops were analyzed to explain the government’s support plans for the agricultural sector in the first to sixth economic development plans.
Materials and Methods: To calculate the impact of currency misalignment, this study employed a rigorous econometric framework. First, the equilibrium exchange rate was estimated using the Vector Error Correction Model (VECM), which accounted for the long-run cointegrating relationships between macroeconomic aggregates. Second, the real exchange rate was calculated based on the Purchasing Power Parity (PPP) theory to determine the extent of misalignment from the equilibrium path. Finally, these measures of exchange rate misalignment were integrated into standard OECD-based support indicators, specifically the Producer Support Estimate (PSE) and the Consumer Support Estimate (CSE). This methodology enables a dynamic analysis of how fluctuations in the exchange rate alter the effective protection afforded to pistachio producers and the implicit welfare gains or losses experienced by the consumers.
Results and Discussion: The study findings showed that the real exchange rate had been on the path of balance in no year, and the application of different exchange rate policies had caused it to be overvalued in some years and undervalued in other years. Other results of the research showed that the policies of Iran’s agricultural sector, based on the real exchange rate and its equilibrium value in supporting producers through the pricing of agricultural inputs and outputs and the regulation of exchange rate policies, were unsuccessful. The interests of pistachio consumers were taken into account instead of the interests of producers, leading to suppressed prices as well as hidden taxes imposed to the producers. In addition, during the studied period, there were social pressures from activists of the agricultural sector, sectoral and exchange rate policies with the aim of reducing the hidden taxes imposed to the farmers. However, the findings also highlighted a notable shift during the latter half of the studied period. Persistent social and political pressures from agricultural stakeholders, combined with emerging sectoral advocacy, compelled policymakers to adjust sectoral and exchange rate interventions. These adjustments reflected an institutional response to reduce the burden of implicit taxation on the farmers, suggesting that even within a restrictive macroeconomic environment, organized sectoral pressure can facilitate incremental, though not entirely sufficient, policy shifts.
Conclusion and Suggestions: The study concluded that current agricultural policy frameworks in Iran were critically hampered by a lack of coordination with macroeconomic realities. To improve the welfare of beneficiaries and ensure the long-term sustainability of the sector, it is imperative to revise the current approach to agricultural support. Policymakers should take a transition away from ad-hoc interventions and explicitly incorporate the equilibrium exchange rate into the evaluation of agricultural policies. By adopting this as a benchmark for long-term macroeconomic balance and national competitiveness, the government can improve the precision of support measurements and ensure that the policy interventions align with the economic realities of the sector. Therefore, it is essential to align the exchange rate and sectoral policies so that they act in synergy with agricultural support measures for crops such as pistachio. Furthermore, the equilibrium exchange rate should be utilized as the monetary benchmark for evaluating both border-related policies and domestic policies affecting the pistachio crop. Since the exchange rate serves as the primary mechanism for converting the export value of pistachios into the domestic prices, any administrative determination or deviation from the equilibrium rate can significantly alter the level of producer support. Consequently, the exchange rate policies must be designed to achieve macroeconomic objectives without undermining support for the agricultural sector, particularly for high-value export crops like pistachio.