81455
Direct tax revenues stood at 299.8 trillion rials ($6.3 billion) and registered a decline of 3.4% YOY.
Direct tax revenues stood at 299.8 trillion rials ($6.3 billion) and registered a decline of 3.4% YOY.

Former CBI Chief Enumerates Pattern of Budgeting Flaws

Last Wednesday, Iranian lawmakers approved the revised outlines of the budget for the next fiscal year, only after they rejected it the first time it was put to vote three days earlier
Selling bonds is a highly unsuitable tool to ease the government’s unpaid debts

Former CBI Chief Enumerates Pattern of Budgeting Flaws

Former governor of the Central Bank of Iran, Tahmasb Mazaheri, lays the blame for the first-ever rejection of the general outlines of the country’s budget by parliamentarians on hereditary problems that are not exclusive to next year’s (March 2018-19) budget bill and have been there for years.  
Last Wednesday, Iranian lawmakers approved the revised outlines of the budget for the next fiscal year (starting March 21), only after they rejected it the first time it was put to vote three days earlier.

 Lack of Transparency
Mazaheri believes lack of transparency is one of the five major problems in next year’s budget bill, stressing that the categorical description of some of the revenues and expenditures—the so-called budgetary tables and sections—is nowhere to be seen in the budget bill. 
“As per the proposed bill, the government is allowed to spend the budget without specifically citing the kind of projects the money should go to. For example, ‘Directed Credit Programs’ section of the bill allows the government to guarantee some of the banking loans without considering the fact that such guarantees would burden the government with mounting debts for years to come. There is no mention of such debts in the budgetary tables,” Mazaheri has been quoted as saying by Persian economic daily Donya-e-Eqtesad.
“Currently, government debts are one of the gravest challenges in Iran’s economy while directed credit schemes constitute a significant fraction.”
In the 2016 report included in the annual Article IV review of the Iranian economy, the International Monetary Fund stressed the need for Iran to reduce its directed credit schemes.
“Prudent fiscal policy and liquidity management are critical to keeping inflation low and stable. The government should sharply reduce its directed credit schemes and adjust regulated prices to curb liquidity pressures,” he said.
According to the Central Bank of Iran’s latest report, the government had to issue 106% more bonds during the first eight months of the current fiscal year (March 21-Nov. 21) compared with the corresponding period of last year. Bonds worth 583.3 trillion rials ($12.4 billion) were issued during the period under review.

 Sales of Capital Assets Don’t Count as Revenue
Mazaheri pointed out that the proportion of revenues received by the government is not revenues in actuality. 
“Effectively, they are the yields from sales of capital assets, including sales of oil, public factories [through privatization], mines and forests. If you sell your home, you cannot claim that you have earned revenues,” he said.
The CBI report indicates that the government’s overall revenues in the eight months stood at 247.4 trillion rials ($5.62 billion), posting a rise of 12.4%, while its spending hit 642.8 trillion rials ($14.6 billion) to register a 39.6% growth year-on-year. 
Revenues associated with the sales of oil and petroleum products amounted to 536.8 trillion rials ($11.4 billion), indicating a 46.2% YOY rise but lower than the projected 767.6 trillion rials ($16.3 billion).  

 Unrealistic Projections
The former CBI governor noted that the budget bill suffers from unrealistic revenue projections, and tax revenues collected by the government in the current year (March 2017-18) can vouch for this claim. 
“The projected figures were much bigger than the actual tax revenues. Inflated projected revenues give way to unrealistic spending plans that increase borrowing on the part of the government to cover the gap between the cost of spending plans and revenues. It also gives rise to the budget deficit,” he said.
The CBI report shows that although tax revenues were estimated to hover near 784.9 trillion rials ($16.7 billion) during the period, they only reached 600.6 trillion ($12.77 billion), registering a 3.1% increase YOY. Overall, direct tax revenues stood at 299.8 trillion rials ($6.3 billion) during the period and registered a decline of 3.4% YOY.

 Mounting Debts
Mazaheri further said budget planners failed to cite how the government would settle its debts in the budget bills. 
“Such debts include payments the government has to make to banks, subsidies it pledges to allocate to essential goods, export prizes, etc. These figures are all commitments taken on by the government and it faces mounting debts that are very difficult to disburse even in the course of five years,” he said.
“For example, debts accumulated by pension funds are not specified in the bill. Their debts reach around 200 trillion rials ($4.34 billion) annually.”   
The government’s widening budget deficit during the eight-month period reviewed by the central bank stood at 395.4 trillion rials ($8.4billion).
“For years, many leading experts have contributed to the debate on how the government should pay off its arrears. In 2016 and 2017, they decided on government bonds. But the very terrible thing was that the government availed itself of this opportunity to finance its current expenditure, whereas selling bonds is a highly unsuitable tool to ease the government’s unpaid debts,” he said.
Mazaheri concluded that nearly 740 trillion rials ($16.08 billion) worth of bonds will reach their maturity next year but the figure has not been mentioned in the budget bill in order to downplay the scope of the problems. 

Short URL : https://goo.gl/Ah3r5g
  1. https://goo.gl/aaz5eR
  • https://goo.gl/pqCpjC
  • https://goo.gl/iVfq1N
  • https://goo.gl/KBWYXD
  • https://goo.gl/qdQfhA

You can also read ...

Nat’l Virtual Currency in the Offing
Months after the idea was first publicized, it seems that Iran...
Valiollah Seif
Governor of the Central Bank of Iran said on Wednesday anti-...
Lexus’ New Crossover to Break Cover  in March
Lexus will pull the covers off of the production version of...
5th Indian Wheat Cargo Arrives for Afghanistan in Chabahar
India’s fifth consignment of wheat to be sent to Afghanistan...
Presale Crosses  96,000 Gold Coins
The presale of Bahar Azadi gold coins priced at 14 million...
Spanish Foreign Minister Alfonso Dastis met with President Hassan Rouhani on Feb, 21.
Foreign ministers of the Netherlands and Spain are in Tehran...
SCI Puts Inflation  at 8.3%
The average goods and services Consumer Price Index in Iran...
Bank Loans Top $100b in 10 Months
Banks and credit institutions doled out more than 4.62...

Add new comment

Read our comment policy before posting your viewpoints

Trending

Googleplus