In a report published on December 25 Iran’s Majles Research Center, an influential parliamentary think-tank, said next year’s budget bill has only been balanced on paper.
The report says the budget for the next fiscal year (starting March 21, 2020) will be 50 percent in deficit despite plans to issue government bonds as well as borrow from the National Reserve Fund.
The next budget as presented to the Parliament by President Hassan Rouhani on December 8 will allow the government to publish government bonds worth nearly $9 billion based on the government official exchange rate, 30 times more than in the previous six years. However, this will not be sufficient to close the gap in the budget.
The proposed budget is around $115 billion based on the government’s official exchange rate which is nearly one-third of the free market rate.
The think-tank’s report also says to avoid a budget deficit the government has several options including the option to borrow from the Central Bank by pushing for printing money to finance the budget deficit and deal with the resulting high inflation.
The second option the report mentions is capitulating to U.S. pressure and negotiating to remove paralyzing U.S. sanctions. This option is to be “avoided”, mainly due to political reasons or “defensive measures” according to the report.
The government has compiled next year’s budget on the basis of exporting one million barrels of crude oil per day, but the country’s oil exports are much lower now due to the U.S. sanctions; around 300,000 barrels per day. Last week an official said the budgetary assumption that Iran can sell one million barrels per day of crude oil in the coming year was to “inspire hope” in people, rather than a realistic projection.
According to the International Monetary Fund (IMF) Iran is going to face a budget deficit of around $37 billion in the current year (ending March 20, 2020). The shortfall will be equal to 8.1 percent of the country’s GPD. The latest IMF report also says Iran’s economy will contract by 9.5 percent in the current fiscal year, the worst since 1984.
However, to balance the budget the government is also planning to increase its tax revenues by 27 per cent and its revenues from privatization by more than 1,000 percent, both hard to achieve in a shrinking economy.
According to the report, every child born in the current fiscal year is inheriting a minimum of 80 million rialss (approximately $1,900) of public debt accumulated so far.
Source » radiofarda