Domestic Economy

Sanctions Envisaged in Next Year’s Budget

Sanctions Envisaged  in Next Year’s Budget Sanctions Envisaged  in Next Year’s Budget

Iran's budget bill for the next fiscal year has been prepared under the assumption that western sanctions against the country would continue, said Minister of Economy Ali Tayebnia on Tuesday.

Negotiations between Iran and the six world powers (P5+1) to reach a final deal over Tehran's nuclear energy program came to an end on Nov. 24 – set as the self-imposed deadline – with both sides agreeing to extend the talks for 7 months, that is until July 2015. The extension would allow the negotiators to narrow down their remaining differences in order to reach a "comprehensive" deal after an interim agreement was reached in Geneva in November 2013.

If a final deal is reached, all US, EU, and UN sanctions against Tehran will be lifted in exchange for Iran limiting parts of its nuclear program.

"The government is prepared to adjust its budget to cope with the new situation and has already taken necessary measures to deal with the recent decline in oil prices," Tayebnia said on the sidelines of a meeting with provincial governors in Tehran, as reported by IRNA. "Not even a further plunge in oil prices can have an impact on the economy."

On Monday, the minister said the next year's budget will be based on an oil price of nearly $80, adding, "Such conservative price estimate will enable us to easily tackle the impact of further oil price falls."   

In recent weeks, oil prices plunged to below $80 a barrel in international markets. The fall has given rise to speculations that the Iranian budget could be facing a possible deficit, though high ranking officials dismiss the possibility.

On Sunday, Mehdi Karbasian, the deputy minister of industry, mine and trade announced an administration decision to set the oil prices somewhere between $70 and $75 a barrel in next year's budget, which is expected to be submitted to the parliament for vote in the next few weeks.

The minister also said that the dollar-rial exchange rate is not going to change in the next budget.  

Currently, Iran has a multiple exchange rate system. The dollar is officially traded at around 26,800 rials. In the free market, the dollar is traded at around 32,520 rials.

Valiollah Seif, the governor of the central bank, who was also attending Tuesday's meeting, predicted that the dollar rate for the next budget will be set at 28,050 rials.

>>>Improving Trend

The economy minister on Monday expressed hope that investors would soon channel their money into the country's manufacturing sector once sanctions are eased.

"The economy is moving in the right direction, and we hope to overcome the difficulties ahead," Tayebnia said.

Regardless of the outcome of the nuclear talks, the government is ready to go ahead with its economic to prove that Iran will be able to run it economy even under sanctions, he noted.

He said that investment in the Iranian market has proven to be lucrative, noting, "Iran is amongst the securest counties in the region and investment will be profitable here."

"The economic growth rate for the second quarter of the current year is yet to be released; however, we predict that the statistics will show a positive trend," he said. "The recession is now under control and positive economic growth was registered for the first quarter of the year," he added.

According to the central bank's data, the inflation rate is hovering at around 20 percent, falling from more than 40 percent a year ago.