Many experts believe that the newly-unveiled budget bill for the fiscal 2023-24 suffers from countless structural problems. It is neither operational, nor conducive to productivity. With a high operational budget and low expenditure budget, I believe there is no need to review the details of the bill, because it lacks transparency, Mohammad Reza Monjazeb, an economic expert, said in a write-up for the Persian daily Ta’adol.
The Iranian Parliament passed the outlines of next year’s budget bill, which was submitted earlier this month by President Ebrahim Raisi on Jan. 22.
The main figures in the bill include 19,840 trillion rials ($44 billion) allocated as operating budget (including revenues derived mainly from taxation and exports at the disposal of the government) plus 1,800 trillion rials ($4 billion) as revenues exclusive to ministries and governmental institutions, which bring the total sum of the general budget to 21,640 trillion rials ($48 billion). The budget of state companies, banks and for-profit organizations has been put at over 30,976 trillion rials ($68.8 billion). All in all, the ceiling set for the government’s total budget is at over 52,616 trillion rials ($116.9 billion).
All the figures indicate a significant increase compared to those in the current fiscal 2022-23 budget, which considering the high inflation rate in Iran is not unusual.
According to Fars News Agency, the budget bill expects daily sales of 1.4 million barrels of oil at $85 per barrel. It is looking to earn 6,030 trillion rials ($13.4 billion) from sales of crude oil and its derivatives in the year ahead. Notably, projected oil revenues constitute around 30% of the operating budget resources.
The civil development budget has reportedly increased by 26% compared with that of the current fiscal year.
The government is also expecting to earn 8,380 trillion rials ($18.6 billion) in taxes, which show a 59% rise compared to the current year’s budget.
A translation of the expert’s article follows:
Up to 40% of revenues and expenses (earned in the country) are estimated to be at the disposal of the government, which means that the budget will mainly be used to pay salaries and wages. This trend shows that the budget in Iran is not written with the aim of advancing the country, rather it is used to cover current expenses. Such a process will make the government budget bigger by the year, while it chips away at development and deepens recession and poverty.
Problematic Budgeting
Up to 60% of the budget are spent by state-run companies, which are beyond the full control of the government. That means a significant part of the budget is not transparent. This problem becomes more prominent when we realize that in recent years, huge accumulated losses of companies (banks, etc.) have been incorporated in the budget of state-owned companies. The senior executives of these companies have allocated handsome perks and benefits for themselves while their companies are making losses.
Does anyone know how these companies could pay astronomical salaries to their CEOs and boards of directors? This destructive course of action stems from the fact that the budget of state-owned companies is not subject to supervision. The parliament should probe into their activities to determine how much of the country’s economy is loss-making. Undoubtedly, the CEOs of state-run companies will act differently, once they know their performance is being monitored.
Remuneration accounts for 84% of the government operational budget. The budget in Iran is not written with the aim of achieving economic growth and development; it is a document for paying the salaries of government personnel.
Sadly, government recruitments will continue in the years to come, which means the operational budget will increase and the share of capital expenditure will shrink even further.
Now what is the purpose of all these expert discussions, agreements and objections and the time spent on approving the budget? I believe that such an unproductive financial document does not deserve analysis.
The details of budgets, aligned with economic growth, development and business prosperity, are worthy of analysis. Current expenses constitute more than 80% of the government’s budget and the budget allocated to development and economic growth is highly unlikely to be realized.
