Budget Shrinks 4.6%, Gov't Rolls Back Spending

President Hassan Rouhani will ask for a smaller budget from the parliament for next year. The government is rolling back its expenses in appreciation of economic realities.

He will take the budget for the next Iranian year (startting March 21, 2017) to the parliament on Sunday.

The president said he will ask for 3,200 trillion rials ($83.6 billion at market exchange rate) for next year, from the parliament in a meeting in Mashhad, the center of Khorasan Razavi Province on Thursday. 

That will put the next budget 4.6% lower than this year's 3,354 trillion rials. The budget will also be smaller in dollar terms due to the greenback's gains against the rial.

The drop in the budget is a break from the normalcy of annual budget increases in Iran. The current year's budget was 15.6% larger than the previous budget. 

Seemingly this year's surging deficit—the government racked a $6.2 billion deficit in this year's first quarter compared to $13 billion in all of last fiscal year—has awakened the government to reality, and forced the administration to make more realistic estimates.

More Oil Revenues

The rollback in the budget is despite expectations of higher revenues from oil sales for next year by the Rouhani administration.

Oil prices reached their highest level in a year last week as "the world's largest oil exporters agreed on Wednesday to cut output for the first time in eight years to erode a global supply overhang that has persisted for two years and halved the value of a barrel of crude", Reuters reported on Friday. 

"The cost of a barrel of Brent crude rose by more than $2 to just over $54 a barrel, as the rally that greeted news of an agreement reached by producing nations in Vienna extended into a second day," Guardian wrote on Thursday.

"The amount of production cut and each OPEC member's share has been set, but the Islamic Republic of Iran, which had fallen behind on production due to sanctions, was exempted and will further increase output in the coming months," said Rouhani.

The OPEC deal and the higher oil prices it will bring, coupled with a smaller budget, will mean a lower deficit for Iran in the coming year.

 Return to Investment

As for government investment, for which the budgetary provisions were scrapped this year to cover expenses, the administration is hoping to spend 600 trillion rials ($15.6 billion) next year. 

The administration has made special provisions for investment in jobs, rail transport, water, sewage and environmental projects.

Rouhani said, "Profitable investment plans will be carried out through consortiums involving the government, the National Development Fund of Iran—a sovereign wealth fund that receives part of the country's oil revenues—commercial banks and private sector contractors. We were able to raise our investment budget this way."