Iran ICT Ministry Glum About Proposed 2019-20 Budget

EghtesadOnline: The ICT Ministry and affiliated companies will get 37.6 trillion rials ($342 million) next year according to the 2019-20 budget bill submitted to the Majlis on Tuesday by President Hassan Rouhani.

News ID: ۷۴۶۳۸۸

29 December 2018

In the proposed budget, published on the website of the Plan and Budget Organization (PBO), the ministry’s funding for the coming fiscal is unchanged compared to the current year that ends in March 2019.

However, compared to the budget for current year (March 2018-19), the next budget is focused more on operational spending and less on infrastructure development.

As per the government’s proposal, the ministry’s operational expenditure is expected to increase 48% compared to this year, reaching 7.5 trillion rials ($68.5 million) from 5.1 trillion rials ($46.3 million), Financial Tribune reported.

Funds for acquiring capital assets by the ICT ministry has been cut by 7.5% to 30.1 trillion rials ($273.6 million) from last year’s 32.5 trillion rials ($295.9 million).

The budgetary figures can change depending on the debates of lawmakers who must approve the bill before it becomes law. However, if the funding figures are not increased, this would send a signal that the government cannot afford infrastructure expansion as before.

Furthermore, the ministry’s revenue in the coming fiscal is forecast at 64.3 trillion rials ($584 million). The main source of revenue will be from communication operators who lease telecom infrastructure from the ministry. Earnings from this source alone are forecast at 60.9 trillion rials ($553.6 million) in the proposed budget.

What is further gathered from the official funding figures is that the government does not expect the ministry’s income to increase because the projected revenue is similar to the amount seen in the current year.

Saddled by Sanctions

Overall general revenue in the budget bill is forecast at 4.07 quadrillion rials ($37 billion) -- up 5.44% compared to the outgoing year in March 2019).

The ICT Ministry has a 0.92% share in general revenues as mentioned in the new budget.

ICT Minister Mohammad Javad Azari Jahromi on his Tweeter account and speaking with the press has said that funds allocated to his ministry are not sufficient. “We will try to get our fair share of the budget,” he said but did not say how.

Next year’s budget has been put together at a time when the United States has imposed what it calls "toughest ever" sanctions against Iran after President Donald Trump abandoned the international nuclear deal Iran and the world powers signed in 2015.

The unilateral sanctions (in two phases), first in August and second in November, attempt to limit Iran's trade with the world, especially the country’s oil exports  --  a major source of government revenue.

This could significantly strain Iran's budgetary resources in the year ahead and the government has already been running deficits in the past years.

A report by the Central Bank of Iran shows Iran’s budget deficit was bigger than forecast in the seven months of the current fiscal year (March 21-Oct. 22) to reach 391.4 trillion rials ($3.55 billion).

The shortfall was larger than the budget’s forecast of 190.9 trillion rials ($1.73 billion) for the seven months and was 74.8% over and above compared to the deficit in the corresponding period a year ago.

An earlier CBI budgetary report showed the deficit at 372.3 trillion rials ($3.68 billion) in the first half of the current year (March 21-Sept. 22).

With the deficits running high, it is not certain whether the ICT Ministry will be able to convince President Rouhani to give it more money.

Aid Packages, Loans

Companies and organizations affiliated with the ICT ministry can set aside 1.4 trillion rials ($12.7 million) from their own resources for aid to venture capital funds and online service providers. As per law, the minister must approve each allocation.

The mechanism for allocating funds is outlined by the ICT Ministry and the PBO.

As per the budget bill, agent banks will be permitted to allocate 40 trillion rials ($363.6 million) for asset-based loans to academic and scientific centers for purchasing equipment and renovating labs. Furthermore, academic centers will be eligible for loan repayment exemptions for two years.

The bill also says that the loans can be used for importing equipment only if the Vice Presidential Office for Science and Technology or a related ministry approves that the imports are not produced in Iran.

This part of the budget bill is to be detailed in an executive order, which will be prepared jointly by the PBO, CBI and the science and health ministries.

In the coming year that starts in March, universities and centers of higher education, along with science and technology parks, can apply for loans equivalent to their reported income in the current fiscal.

(The USD in this report is converted at 10,000 rials).