Economy, Domestic Economy

$60 Oil Fair for 2015-16 Budget

$60 Oil Fair for 2015-16 Budget $60 Oil Fair for 2015-16 Budget

An economist in Tehran believes the next year’s budget should be based on an oil price of $50 to $60. Mahmoud Jamsaz, in an interview with ISNA in the weekend, urged the government to identify new income sources to offset the deficit caused as a result of harsh decline in oil prices in the international markets.

Iran’s economy is largely reliant on sales of oil and condensates. Officials predict the country would export 1.5 million barrels of oil and condensates by the end of this fiscal year, ending March 20, 2015.

“The oil price in the current year’s budget was set without considering the fact that the prices could be subject to change due to political and economic developments worldwide,” Mahmoud Jamsaz told the news agency.

He further noted that such miscalculation on the part of the government led to the deficit of around 180 trillion rials in spring alone, even before oil experienced the harsh price decline.

The economist’s remarks came after Mehdi Karbasian, the deputy minister of industry, mine and trade, announced an administration decision to fix the oil price somewhere between $70 to $75 a barrel in its budget draft, which is expected to be submitted to the parliament in a few weeks.

Earlier this month, Mohammad Baqer Nobakht, the government’s spokesman, said the next budget bill will be based on an oil price of around $70 to $80.

Last year, the government adopted a budget based on a projected oil price of $100 per barrel. However, hit by weak demand and increased shale production in the US, global oil prices fell down to below $80 in recent weeks, reducing Iran oil revenue by 30 percent, according to President Hassan Rouhani.

“Even if we were able to export the predicted amount, we would not been able to collect the money because of the financial sanctions imposed by the US and EU,” Jamsaz said.

He further rejected the possibility for Iran to increase oil production under the existing sanctions, arguing, “Iran’s oil sector needs to attract up to $400 billion in investment should it be able to return its production to the level back in 1977 – about 6.3 million barrels a day.”

Jamsaz said there are enough convincing reasons for the government to find new sources of income, which can replace oil revenues.

“Oil is losing its appeal as a source of income. The EU economy is getting smaller and the US is increasing its oil production to 7.5 million barrels a day,” he noted.

Taxes and the sale of government bonds can be the most important sources of income, the economist said. Due to the large number of tourist attractions and its geographical location, he suggested that Iran can use its tourism industry as a major source of revenue, “though the industry still suffers from infrastructural shortages despite its great potentials.”