Efforts are underway to set up an electronic budget management system to promote monetary discipline and monitor government debts, the Economy Minister Ali Tayyebnia said.
"With the aim of restoring financial discipline and regulating government affairs, the Ministry of Economy has taken measures including a plan to set up a smart budget management system with the help of advanced information technology and other tools," he told the official government news website dowlat.ir on Wednesday.
Lack of monetary discipline has traditionally been a setback for governments over the decades. A bad situation has become worse due to the absence of a comprehensive database and the successive government habits of splurging big money on short-term and populist programs have made meaningful reform a difficult task, if not impossible.
Moreover, this lack of transparency had made government borrowing from the central banks a norm rather than an exception. Runaway inflation, a surge in monetary base and rent-seeking behavior have been other added problems.
Asked if the initiative is to distinguish the present government from its predecessor, which was accused of deviating from budgetary laws, he said, “The present government is committed to ensure that the funds (budgets) are used for their intended purpose.”
The smart system connects different bodies such as Management and Planning Organization (MPO), the treasury, Customs Administration, the Central Bank of Iran and all other units with a key role in the budget, making the entire planning process open, transparent and efficient.
Lacking Data
Tayyebnia also elaborated on a new project to “manage government debts and assets” as part of the electronic budget plan, saying “so far there has been no organization to estimate government debts let alone settle them, so there is no official record on government liabilities.”
What the CBI publishes under the title ‘government debts’ actually is only the money owed to the CBI and not all the government’s commitments to local and foreign organizations and companies who offer services to state bodies, banks and contractors.
According to the minister, to help plug the holes his ministry is in the process of creating” a new office to calculate government debts.” This move would be an obligation in line with a new law aimed at removing obstacles to manufacturing competitiveness; the law requires the economy ministry to announce the government’s total debts within six months.
“We are in the process of computing and classifying the debts and are close to reaching a precise figure which will be sent to the Parliament and other regulatory institutions within three months.”
He stressed that there is no problem with government owing money, but the real issue is not having a debt managing and monitoring body or failing to meet financial commitments on time.
Shifting Focus
“The ratio of government debt to GDP is 30% while this figure could be up 100% in developed countries. So the focus should shift from decreasing debts to lowering the risk of lending money to the government. The first step to achieve this goal is to set up a bond market to turn the debts into tradable securities which could be used as collateral by the banking system,” Tayyebnia said.
Commenting on the government’s policies to promote domestic production, he said there is a long history of government control over the monetary base by implementing financial policies and budgetary decisions which has prevented the CBI from carrying out its own policies and plans.
“But the present administration is determined to ease the government’s grip on monetary policies and let the CBI decide policy in light of ground realities and economic variables.”
The minister said CBI’s independency must be preserved through action and not lip service. “If the government formulates monetary policies when preparing the budget and in the process imposing its decisions on the CBI, there would be no space for CBI to maneuver.
Pointing to new technology that facilitates access to the actual amount of taxes and check tax evaders, Tayyebnia said a new project will be launched that will help organizations share financial information.
“Even though different financial authorities such as the Iranian National Tax Administration (INTA) possess valuable information, they don’t have a network to share the data,” he said.
“The new network envisions interchange of information between all organizations that manage financial and economic data.”
He noted that obviously INTA is among bodies that will benefit from the new technology. For example as soon as customs clearance is conducted for an imported commodity, INTA gets immediate access to the data. Furthermore, banking system would be able to contact INTA to inquire about the customers’ creditability and accountability to make better decisions in providing loans and services.
