Data released by the government indicates its budget earnings reached 2,630 trillion rials ($9.7 billion) in the first five months (March 21-August 22) of the current fiscal year.
It said 1,495 trillion rials ($5.5b) was from tax and customs duties, the semi-official Fars News Agency reported.
Likewise, the government sold assets worth 148 trillion rials ($550 million), which was barely 9% projected in the 2021-22 budget.
In addition, the government sold 991 trillion rials ($3.6b) in debt, including treasury bills and bonds.
Treasury bills accounted for 675 trillion rials ($2.5b) of the total bonds in the five months. Income from treasury bills goes to fund development projects. Government income from bond auctions was 155 trillion rials ($570m) in the period.
Government spending reached 3,163 trillion rials, a big portion of which was operational expenses, namely wages of state and government employees and retirees.
It needs mention that government has depended on discretionary funds from the Central Bank of Iran from which it so far has borrowed 530 trillion rials ($2.2b) to this end.
Discretionary spending by the government increased on the previous fiscal year. As per a Cabinet decision on June 16, the government was allowed to borrow 4% of the fiscal budget spending from the CBI, up from the initially mandated 3%.
As per the budget rules, the operating budget (including revenue from taxes and exports) has been projected at 12,779 trillion rials ($47b).
Add to this funds earmarked for ministries and government institutions worth 958.48 trillion rials ($3.5b), which puts the general budget at 13,737 trillion rials ($50).
The budget of state companies, banks and for-profit organizations is 15,713 trillion rials ($58b).
Dire Consequences
Taking stock of the deficit spending, the CBI earlier reported that the pattern of successive governments’ reliance on discretionary funds from the CBI has led to money supply of historical proportions.
Need for increased discretionary spending rose after the last government failed to realize projected revenues seen in the budget. For example, income from tax from stock trade in Q1 declined sharply due to the bearish market.
The monetary base grew 9.2% in the first quarter of current fiscal year (ending June 21), which the CBI said is the product of the mountain of government debt to the central bank.
The monetary base was reported at 5,009 trillion rials ($18.5b) at the end of Q1, posting 30.7% or 1,170 trillion rials ($4.3b) increase compared to the same month a year before.
Net government debt to the CBI increased by 633 trillion rials ($2.3b) or a staggering 281.6% in three months, contributing to 13.8% of monetary base growth in Q1.
Referring to ambitious revenue projections in the present budget, economists have warned that the government is facing one of its biggest budget deficits in recent memory. Overreliance on loans from the National Development Fund of Iran (the sovereign wealth fund), steep increase in taxes and the forever rise in spending by state-run companies have been major concerns.
In addition, this year’s budget is expected to give further rise to money supply and push inflation higher by imposing unprecedented financial burden on banks adding to the plight of the central bank.
This year’s budget includes new decrees to the CBI and the banking sector, which very likely will result in high-powered money and money supply growth.
There are fears that overburdening banks with assorted funding and lending obligations can and will undermine the CBI’s efforts to improve their weak balance sheets.
Highlight: The CBI has warned that the pattern of successive governments’ reliance on discretionary funds from the CBI has led to money supply of historical proportions
