The Iran Chamber of Commerce, Industries, Mines and Agriculture has criticized the budget bill for fiscal March 2021-22 and called for rethinking.
Reflecting the opinion of specialized commissions and provincial chambers across the country, the ICCIMA in a report said private businesses are concerned about the impact of budget on macroeconomic variables and their work environment, the chamber's news website reported.
Echoing the views of a cross-section of experts, the chamber said the new budget is imbued with overestimation of revenues and called for cutting government spending.
"Due to risks arising from [inability] to realize projected revenues and the government's lack of flexibly in [reducing] its expenses, there are concerns over the macroeconomic impact of next budget on economic stability," reads on excerpt of the report published on otaghiranonline.ir.
If the projected income is not realized and government spending not reduced, the chamber said, it would not be far-fetched to again see higher forex rates, ballooning inflation and increase in interest rates.
Overreliance on financial resources of the National Development Fund of Iran (the sovereign wealth fund), steep increase on revenues from taxing private enterprise and ambiguities about forex policies and spending for state-run companies are major concerns, the chamber said.
In the next budget, the government wants to borrow €2.8 billion from the sovereign wealth fund. It also expects to generate 2,000 trillion rials ($8 billion) from oil and gas export -- a projection seen by many as ambitious and unrealistic given the economic siege imposed by the United States.
Total tax earnings in fiscal 2021-22 has been set at 2,515 trillion rials ($9.6b). This includes 591 trillion rials ($2b) from tax on legal entities, 491 trillion rials ($1.8b) income tax, 238 trillion rials ($915m) wealth tax, 235 trillion rials ($903m) tax on imports and 957 trillion rials ($3.68b) tax on goods and services.
The ICCIMA also took issue with the government decision to allocate 1,600 trillion rials ($6.4b) to state-owned companies. The chamber criticizes the ambiguous manner through which state companies spend money, calling for a detailed public report on their financial performance.
Operational Expenses
Regarding measures to cut operational costs of the government, the ICCIMA claimed that the government policy to increase workers’ wages to compensate for inflation is ill-advised.
It argues that the best possible way to alleviate poverty is to increase investment in production and simultaneously take measures to curb inflation. Failing to do so means “in the race between inflation and higher wages, it is always inflation that wins."
A 25% rise in the salaries of government workers and retirees has been proposed in the next budget. In the next fiscal year, the operating budget has been projected to reach 8,413 trillion rials ($33 billion).
Reflecting on the overestimated revenue forecast in the next budget, the Majlis Research Center predicts that the government’s budget deficit is estimated to reach 3,200 trillion rials ($12.8b).
