President Hassan Rouhani submitted the budget bill for the fiscal 2019-20 to the parliament on Tuesday.
"Improving the livelihoods of the Iranians, stimulating domestic production and boosting employment are at the core of next year's budget," President.ir reported.
The budget proposal had been sent by the Plan and Budget Organization of Iran to the parliament as scheduled on Dec. 6, despite the parliamentary recess, only to be sent back to the organization to be revised on the order of the Leader of Islamic Revolution Ayatollah Seyyed Ali Khamenei.
A reduction in government spending and the economy’s reliance on oil revenues were some of the reforms suggested by the Leader. Apparently, these reforms have been incorporated into the text of the budget bill.
General revenues in the budget bill stand at 4.07 quadrillion rials ($38.76 billion), 5.44% bigger compared to the budget law for the current year (March 2018-19).
"In the preliminary version of the bill, general revenues were set at 4.33 quadrillion rials ($41.23 billion)," Mohammad Baqer Nobakht, the head of PBO, said.
Revenues exclusive to ministries and governmental institutes are projected to exceed 709.12 trillion rials ($6.75 billion) in the budget bill, compared to the current year’s 570.73 trillion rials ($5.43 billion) in the budget law.
As per the budget bill, provincial governorates, in cooperation with the Ministry of Cooperatives, Labor and Social Welfare, have been tasked with identifying and removing households in the top three high-income deciles from the list of cash subsidy receivers
State companies, banks and for-profit organizations, which had an 8.39-quadrillion-rial budget (or 79.9 billion) this year, will get 12.74 quadrillion rials ($121.33 billion) to finance their operations next year.
The share of National Development Fund of Iran from oil revenues (crude oil, gas condensates and natural gas exports) has been set at 20%. NDFI’s share is 14% smaller than what is envisioned in the Sixth Five-Year Development Plan (2017-22).
The government is obliged to pay 14.5% of oil revenues to the National Iranian Oil Company and 14.5% of the revenues earned from natural gas exports to the National Iranian Gas Company.
NDFI, which is independent of the government, was founded in 2011 as Iran's sovereign wealth fund. The goal was to help save money when government earnings are high, especially from oil and gas exports. The fund lends to both public and private firms in need when government revenues are down, especially during low oil prices.
In the first draft of the budget bill, the government had cut to zero the 34% share of NDFI from oil sales to meet its expenditure in the face of dwindling revenues resulting from US sanctions. The move raised the objection of the Leader and has since been revised in the bill submitted to the parliament on Tuesday.
The government has set the ceiling of revenues from oil exports (crude oil, gas condensates and natural gas) for the next year at 1.37 quadrillion rials ($13.04 billion) plus 55.02 trillion rials ($524 million) of the revenues from oil sales for oil-rich, gas-rich and under-developed regions.
Government’s overall revenues (except for oil sales) for the next fiscal is predicted to stand at 2.08 quadrillion ($19.8 billion). Tax revenues have been projected to reach 1.53 quadrillion rials ($14.57 billion). The bill allows the government to sell 510 trillion rials ($4.85 billion) in bonds and buy 250.02 trillion rials ($2.38 billion) of its own matured bonds.
As per the budget bill, provincial governorate offices, in cooperation with the Ministry of Cooperatives, Labor and Social Welfare, have been tasked with identifying and removing households in the top three high-income deciles from the list of cash subsidy receivers.
Revenues saved will then be spent on gradually eliminating absolute poverty and completing high priority unfinished projects of those provinces. Households’ complaints must be responded to within a month.
As part of the Subsidy Reform Plan implemented in 2010, the previous administration removed subsidies on food and energy, and instead paid 455,000 rials ($4.3) to all Iranians on a monthly basis. Thus far, the governments of Rouhani have retained the plan.
Government expenditure for the next fiscal has been projected to hover around 3.2 quadrillion rials ($30.47 billion), including civil servants’ remunerations (952.28 trillion rials or $9.06 billion), goods and services used by the government (233.75 trillion rials or $2.22 billion), properties and asset expenses (190.62 billion rials or $1.81 million), subsidy allocation (116.37 trillion rials or $1.1 billion), grants (64.7 trillion rials or $ 616.19 million), social welfare expenses (1.22 quadrillion rials or $11.61 billion) and other expenses (613.72 trillion rials or $ 5.84 billion).
As the president said on Tuesday, a 20% rise in salaries and wages of civil servants has been predicted for the next fiscal.
Parliamentarians now have 10 days to study the bill and put forth their proposals to the parliament’s special council.
Members of the parliament's specialized commissions will then have 15 days to submit their proposals and amendments to the budget bill to Majlis Joint Commission.
The commission is a parliamentary body responsible for reviewing the budget bill as well as the five-year economic development plans proposed by the government before its final ratification. The commission will have one month to present the budget bill in the open session of the parliament.
The parliament-approved budget needs the final endorsement of the Guardians Council—the body in charge of ascertaining the constitutional and Islamic nature of all laws.
Strained by Sanctions
The budget bill's submission comes at a time when the United States has imposed what it calls "toughest ever" sanctions against Iran's economy after US President Donald Trump, earlier this year, walked out of the nuclear deal Iran signed with world powers in 2015.
The sanctions, which came in two waves, one in August and another in November, seek to limit Iran's trade with the world, especially the Islamic Republic's exports of oil—traditionally a major source of revenue for the Iranian government.
This should significantly strain Iran's budgetary resources in the year ahead, as the government has already been running deficits in the past years.
The Central Bank of Iran's latest budgetary report shows Iran’s budget deficit came in bigger than expected in the seven months of the current year (March 21-Oct. 22) to reach 391.4 trillion rials ($3.87 billion).
The shortfall was larger than the budget law’s forecast of 190.9 trillion rials ($1.89 billion) for the seven-month period and is 74.8% more compared to the deficit in last year's corresponding period.
CBI's previous budgetary report showed the deficit stood at 372.3 trillion rials ($3.68 billion) in the first half of the current year (March 21-Sept. 22).
The latest report also shows the government sold 42.7% more bonds—a total of 498.2 trillion rials ($4.93 billion)—in the seven-month period compared with the corresponding period of last year to cover its widening budget deficit.
The government’s overall revenues during the seven months under review amounted to 415.7 trillion rials ($4.11 billion), indicating a rise of 25.8% year-on-year, while its spending hit 807.2 trillion rials ($7.99 billion) to register a 45.6% growth YOY.
All dollar values in the above text have been converted at a rate of 105,000 rials.
