Iran Budget Deficit Widens to $2.9b

EghtesadOnline: Iran’s budget deficit came in bigger than expected, as usual, in the first four months of the current fiscal year (March 21-July 22) to reach 312.5 trillion rials ($2.93 billion), the latest data released by the Central Bank of Iran on Monday show.

News ID: ۷۴۵۹۹۸

11 September 2018

The shortfall for the period was larger than the budget law’s forecast of 109.6 trillion rials ($1.02 billion) for the period.

The shortfall is 93% more compared to the preceding year’s.

To cover the deficit, the government issued 80.8% more bonds–a total of 314.5 trillion rials ($2.95 billion)–during the period under review compared with the corresponding period of last year, Financial Tribune reported.

Overall revenues during the four months amounted to 185.9 trillion rials ($1.74 billion), indicating a decline of 25.4% year-on-year, while spending hit 498.5 trillion rials ($4.68 billion) to register a 21.2% growth YOY.

Revenues associated with the sales of oil and petroleum products were more than the projected budgetary figure of 343.2 trillion rials ($3.22 billion). They reached 419.6 trillion rials ($3.93 billion), indicating a 60.7% rise YOY.

The government spent 234.1 trillion rials (about $2.19 billion) on development projects duringthe four months, which is higher than the 210.6 trillion rials ($1.97 billion) projected in the budget law for the period.

Tax revenues were estimated to hover around 482.7 trillion rials ($4.53 billion), but they reached 348.8 trillion ($3.27 billion), registering a 17.5% increase YOY.

The government’s tax revenues consist of returns from direct and indirect taxation. Direct taxes include three groups of “tax on legal entities”, “income tax” and “wealth tax”.

Overall, direct tax revenues stood at 152.4 trillion rials ($1.43 billion) during the four months, registering a decline of 4.6% YOY.

Indirect taxes, including “tax on imports” and “tax on goods and services”, reached 196.4 trillion rials ($1.84 billion), indicating a 43.2% rise YOY.

The report also shows tax on imports generated 50 trillion rials ($469.48 million), 98.3% more than the year before while tax on goods and services earned the government 146.4 trillion rials ($1.37 billion), up 30.8% YOY.

According to the Islamic Republic of Iran Customs Administration, a total of 11.55 million tons of non-oil goods worth $15.17 billion were imported into the country, registering a 4.5% YOY.

Value added tax, which is a subcategory of tax on goods and services, increased by 15.4% to reach 92 trillion rials ($863.84 million).

According to Farhad Nili, the representative of the Central Bank of Iran to the World Bank, the chronic issue of Iranian governments running into budget deficits is an example of many imbalances plaguing the economy.

“An economy should either be capable of generating income from within, or it needs to earn resources from outside through investment or taking out loans to cover its expenses. In the absence of these two resources, an imbalanced economy has to create money.

It has been a long time since Iranian governments have resorted to the latter solution,” he told the Persian weekly Tejarat-e Farda in a recent interview.