Iran to hardly escape budget deficite

By Sara Rajabova

The Iranian government plans to submit the next fiscal year’s national budget bill to parliament the next week.

Iran has drafted a state budget for next fiscal year that is 2.6 per cent smaller than the plan for this year, as low oil prices put pressure on the country's finances, according to the media reports.

Government spokesman Mohammad Baqer Nobakht said last December the budget for the year starting on March 20, 2015 has been tentatively set at 2.670 trillion rials, IRNA state news agency reported.

The budget was based on an official exchange rate of 29.970 rials to the dollar, giving it a value of $89.1 billion, according to official.

The budget must be approved by parliament, and figures could change in the three months before it is due to come into effect.

Oil revenues make up the lifeline of the Iranian economy. Taking into account the oil-dependance of the Iranian economy, the plunging oil prices are expected to have its impact on the country's budget. Falling Brent oil to its 12-year low of $33 a barrel this week threatens new damage to Iran's export revenues, which have been hit for decades by international sanctions imposed over its nuclear program.

Iran recorded a government budget deficit equal to 2.58 percent of the country's gross domestic product in 2015. The government budget in Iran averaged -0.22 percent of GDP from 1990 to 2015, reaching an all time high of 7.34 percent of GDP in 2000 and a record low of -6.75 percent of GDP in 1993.

Despite the negative expectation, Nobakht said this week that here will be no budget deficit and there will be no need to borrow any credit, because the Management and Planning Organization is adjusting the government’s next-year expenditure according to revenues.

He told Trend that the dependence of Iran's national budget on the National Development Fund is below 25 percent.

However, the International Monetary Fund estimated that Iran is expected to run a budget deficit of 2.2 per cent of gross domestic product 2015.

Kamran Dadkhah, a professor of economics at Northeastern University in Boston, Massachusetts said Nobakht’s prediction doesn’t seem real.

“Nobakht is joking or hoping for a miracle. The budget for 1394 (2015-2016) showed a deficit of 250,000 billion rials ($8.376 million). In that budget oil revenues comprised close to 30 percent of total government revenues. Since then there has been an inflation of more than 10 percent (if one believes the government data) and oil prices have declined by 30 percent,” the expert said.

Therefore, he ruled out a balanced budget.

“Of course, in the past the government has tried to “camouflage” its deficit by adding dubious items such expected parsimony in expenditures or expected additional income. However, camouflaging the budget deficit is like hiding one’s cancer from oneself,” he noted.

The government of President Hassan Rouhani, a relative moderate elected in 2013, has vowed to reduce the budget deficit and allocate more funds to development projects.

Rouhani earlier announced that the government has decreased the reliance on oil to 25 percent in the budget bill for March 2016-2017.

--

Sara Rajabova is AzerNews’ staff journalist, follow her on Twitter: @SaraRajabova

Follow us on Twitter @AzerNewsAz