The budget for the new Iranian year (2020-21), which started on March 20, was presented to the parliament in November but fell victim to the devastating coronavirus crisis and the election of the new, conservative parliament.
The deliberations of the parliament were accelerated on the order of Leader of the Islamic Revolution Ayatollah Seyyed Ali Khamenei, and a slightly modified budget was submitted to the Guardians Council, which approved it on March 18, IRNA reported.
Iranian economist Djavad Salehi Isfahani has published an article on his weblog detailing the 2020-21 budget figures in three separate tables. Table 1 is the actual nominal numbers, Table 2 shows the real values and Table 3 presents their share in the budget. Excerpts follow:
The main change in 2020-21 compared to the recent past is the sharp decline in oil revenues (share down from 30 to 17 percent) and increase Islamic bonds (up by more than threefold), which is borrowing from the public (or the banks if the public is not willing to borrow).
If you want to a get a rough idea of these numbers in dollars, you can divide them by 20,000, which is my guess for the PPP exchange rate.
The proposed budget was very contractionary, allowing for only a 25% increase in total expenditures at a time when the economy is sinking under the burden of the coronavirus and pressure from sanctions.
Current expenditures were proposed to go up by 15% and wages and salaries by 19%, which are well below the rate of inflation this year (28%) and likely the same or higher in 2020-21.
Development expenditures, the one item that is the best fiscal instrument for creating jobs and boosting the economy, received the least attention, as it was proposed to increase by 13%.
The amended budget is slightly less contractionary. It raises current expenditures by 19%, most of which is because of adjustments to wage and salaries (which I have not seen separately reported), and development expenditures by 42%, a major improvement if the allocated amount is actually spent on development projects, something that has not happened much in the past.
Even with the adjusted higher numbers, development expenditures are, in real terms, only two-thirds of their value in 2016-17. (see Table 2)
The revenue assumptions are very optimistic. According to press reports, oil prices were assumed to be around $50. With a major global recession underway, $30 per barrel seems more likely.
From the budget numbers, it is difficult to guess what is the level of oil exports behind the 988 (or the 1,075) trillion rial values for oil and gas revenues. At 100,000 rials per USD, it would be close to 600,000 barrels per day, which sounds about right.
(I have not included in my calculations the 14.5% of oil and gas earnings that go to the Oil Ministry and the 20% deposits into the National Savings Fund. Shortfalls from predicted values of oil revenues can be withdrawn from this fund.)
In addition to the standard budget items, the government has proposed to pay 739 trillion rials in the coming year (428 trillion rials in monthly transfers according to the 2011 program of ex-president Mahmoud Ahmadinejad and 310 trillion in new payments instituted after the November gasoline price hike), equivalent to 11% of the total budget expenditures. These figures do not include the new “corona transfers” of up to 6000,000 rials to 3 million individuals, which were announced by the head of Plan and Budget Organization, Mohammed Baqer Nobakht, more recently.
