Domestic Economy

$82b Budget Goes to Parliament Next Week

$82b Budget Goes to  Parliament Next Week $82b Budget Goes to  Parliament Next Week

The administration has approved the outlines of the budget bill for the next fiscal year, starting March 21, 2015, and will submit it to the parliament by next week, President Hassan Rouhani said on Tuesday.

Administration officials may make minor changes to the 2,190 trillion rial ($81.7 billion at official exchange rate) government budget (including capital and current expenditures) in the next few days but the bill will definitely hit the parliament's floor just in time, said President Rouhani in a speech upon his arrival in the northeastern province of Golestan.

By law, the administration must submit the budget bill to the parliament by December 6.   

Rouhani traveled to Gorgan, Golestan’s capital on Wednesday, to inaugurate the North South Transport Corridor, a key regional railway which connects the Iranian province with Turkmenistan and Kazakhstan. The inauguration was held in the presence of Turkmen and Kazakh presidents.

The 677 km long railway links Uzen in Kazakhstan with Bereket - Etrek in Turkmenistan and ends at Gorgan, where the railway will be linked to national network making its way to the ports of the Persian Gulf.

  Setting Oil Price

In a separate development on Tuesday, Gholamreza Kateb, the spokesman of the Parliamentary Planning and Budget Committee, revealed that the administration has prepared the budget bill based on oil price of $70 per barrel. The price was set at $100 in the current budget.

“Following the hot debates in the past weeks regarding the adverse impacts of the plunging oil prices on revenues next year, the Rouhani administration finally decided to plan the next year’s budget based on an oil price of $70 per barrel,” Kateb told reporters.

The plunging oil prices come as a result of “excessive oil supply” by oil-rich countries, he said. “There are similar speculations for next year, which makes it necessary for the government to carefully manage current year’s budget and adopt a realistic approach for the year to come.”

A week ago, Minister of Economy Ali Tayebnia said that the budget bill for the next fiscal year has been prepared under the assumption that western sanctions against the country would persist. He 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.”

Earlier, 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.

  Budget Deficit

As administration officials insist on their ability to find alternative resources to reduce the deficit by the year’s end, some experts say budget deficit may even amount to 50 percent.

Head of Iran World Trade Center Mohammad Reza Sabzalipour told Trend on December 1 that the minimum budget deficit will be around 30 percent, but in the worst case scenario the figure may even reach 50 percent.

“The falling trend of oil price in global markets is expected to continue at least until the first quarter of 2015,” he said, adding that the prices may drop to $60 per barrel in the coming weeks.

The OPEC oil basket price has fallen from $108 in June to about $70. Iran’s current fiscal year’s budget was set based on $100 per barrel and 1.3 million barrels of crude oil per day in export.

“Iran is currently exporting less oil than the figure projected in the budget law,” Sabzalipour said, adding that the price of the exported oil is also way below the figure estimated in the budget. “So a considerable budget deficit is completely understandable.”

He warned that next year’s deficit is inevitable. “The government will not be able to pay for its spending in the current year, so some of the debts will be transferred to next year’s budget law.”

To make things worse, Iran cannot receive its own money from oil sales due to the sanctions imposed on its banking system, he added.

The US estimated that Iran’s blocked assets abroad amount to about $100 billion.