Economy, Business And Markets

USD Rate in 2016-17 Budget 29,997 Rials

USD Rate in 2016-17 Budget 29,997 RialsUSD Rate in 2016-17 Budget 29,997 Rials

The government has set the US dollar exchange rate at 29,997 rials in the 2016-17 proposed budget, slightly higher than this year's 29,850 rials.

An informed source told IRNA that the Cabinet after a meeting late Sunday agreed on the rate in the budget law, which is expected to be approved by Parliament in January.

Rate of the greenback in the new budget has been a hot topic of discussion among analysts in the wake of recent market volatility which saw the American currency gain considerably against the rial.   

Income and expenditure in fiscal 2016-17 is indeed worthy of attention as global crude oil prices are being hammered amid oversupply, rising production, tepid demand and OPEC's internal feuds over both price and production.

The greenback's official rate is currently hovering around 30,118 rials with the more volatile parallel market recorded 36,300 rials as of Monday.

Promoting the 'resistance economy', curbing inflation, striving for decent growth rates and enhancing the efficiency of domestic markets has been announced by the government as among the key features of next year's budget, IRAN reported.

Forex rates and international oil prices are the major factors affecting the national budget, as is the case in most oil producing and exporting nations.

Next year's budget has calls for increasing R&D funding and raising it to 1% of the GDP. Spending on the controversial and costly Mehr Housing Project, an ambitious plan of the former government to build two million low-cost housing, is set to increase two-fold compared to last year.   

Uphill Task

Vahid Shaqaqi , an economist, believes that the government should have set the US dollar rate above 30,000 rials in next year's budget.

"Official forecasts for oil prices in the next year are between $40-$50 per barrel and considering the country's 1.5-1.8 million barrels p/d export potential after the lifting of sanctions, the rate should at least have been set between 32,000-33,000 rials," EghtesadOnline website quoted him as saying.

He predicted the greenback market rate to reach 40,000 rials by next the next fiscal year (starts March 21, 2016).

Shaqaqi referred to the declining demand for crude in Asia, led by slowdown in China, and said, "This will result in further cuts in oil prices in the coming days."

Saying that only $4 billion of the country's frozen assets will be released next year, he warned that the government will apparently face a tough time meeting its forex needs.

The analyst also cast doubts on the government's ability to increase tax revenues to 950 trillion rials ($31.5 billion) saying "Collecting such amounts in tax revenue is easier said than done."