Rouhani Submits Budget Bill

EghtesadOnline: President Hassan Rouhani submitted the budget bill for the upcoming Iranian year (March 2020-21) to the parliament on Sunday which, he said, is indicative of the country’s tenacity and resistance in the face of US sanctions.

News ID: ۷۴۹۱۳۸

09 December 2019

In the next fiscal year (to start March 20, 2020), the operating budget (including revenues derived mainly from taxation and exports at the disposal of the government) has been projected to stand at 4,845 trillion rials ($36.98 billion at the market exchange rate of 131,000 rials per dollar as of Saturday's closing).

Add to this, revenues exclusive to ministries and governmental institutions worth 792 trillion rials ($6.04 billion), which takes the total sum of the general budget to 5,638 trillion rials ($43.03 billion).

The budget of state companies, banks and for-profit organizations has been put at 14,839 trillion rials ($113.27 billion), according to Financial Tribune.

All in all, the ceiling set for the government’s total budget is at 19,887 trillion rials ($151.8 billion).

The government's operating budget for the upcoming fiscal year indicates an 8% expansion compared with the corresponding figure in the current year’s budget.

It's noteworthy to consider the inflation in Iran. The Statistical Center of Iran's latest report shows the average goods and services CPI in the 12-month period ending Nov. 21 increased by 41.1% compared with last year’s corresponding period.

Nevertheless, next year's budget will be contractionary.

Tax earnings have been set at 1,982 trillion rials ($15.12 billion) and those from the transfer of capital assets at 991,230 billion rials ($7.56 billion). The transfer of capital assets consists of several sections, including domestic sales and exports of oil products. Notably, the government has projected that its oil and oil products revenues will stand at 482,986 billion rials ($3.68 billion) next year.

Mohammad Baqer Nobakht, the head of Plan and Budget Organization, says next year's oil revenues will be exclusively spent on development projects.

The share of the National Development Fund of Iran from oil resources (crude oil, gas condensates and natural gas exports) has been set at 20%. The government is obliged to pay 14.5% of oil revenues to the National Iranian Oil Company and 14.5% of the revenues yielded from natural gas exports to the National Iranian Gas Company.

Earnings from the transfer of financial assets, including sales of treasury bonds, are projected to reach 1,247 trillion rials ($9.51 billion).

The privatization of state companies will generate 114,871 billion rials ($876.87 million) for the government, as per the budget bill.

On the side of expenditure, the government has considered an average of 15% rise in the wages of employees next year.

The budget allocated to emoluments is set at 1,130 trillion rials ($8.62 billion) and income tax exemption for government employees has been set at 360 million rials ($2,748) per year.

Cash, Non-Cash Subsidies

The government will pay 428 billion rials ($3.26 million) in cash and non-cash subsidies next year as per the budget bill. On top of that, it will allocate 310 billion rials ($2.36 million) for the implementation of the so-called Livelihood Assistance Program, i.e. cash transfers as compensation for higher gasoline prices introduced in mid-November.

As of Nov. 15, the government reformed the gasoline price, according to which, private car owners can buy 60 liters of subsidized gasoline every month with a fuel card for 15,000 rials [11 cents] per liter, up 50% in prices and additional purchases (maximum 250 liters a month) will cost 30,000 rials [about 23 cents] per liter, up 200%.

According to Oil Minister Bijan Namdar Zanganeh, this will increase annual government revenues by $2.5 billion, which will be used exclusively for welfare spending under the Livelihood Assistance Program.

“The government will earn $1 billion more by selling subsidized fuel and close to $1.5 billion from selling non-subsidized gasoline,” he said, adding that the excess supply will be offered on the energy bourse.

Prior to the price hike, the government’s annual earnings from selling gasoline amounted to $31.7 billion that will reach $34.2 billion or 8% higher.

Over the first round of cash payments as compensation, the government granted 550,000 rials ($4.19) to one person households, 1.03 million rials ($7.86) to two-person families, 1.38 million rials ($10.53) to three-person households, 1.72 million rials ($13.12) to four-person households and 2.05 million rials ($15.64) to households with five or more persons.

“About 17.7 million households, including 60 million people, received cash support worth 24,200 billion rials [$184.73 million] through the three-phase Livelihood Assistance Program that started on Nov. 19. Only 20% of the general public were left out in the first round of this aid program,” Ahmad Meydari, deputy minister of cooperatives, labor and social welfare, has been quoted as claiming.

After depositing the first round of cash, the government said it would weigh up offering earnings from higher gasoline prices to people only after monitoring their bank accounts.

“Prior to making another payment, the government will track the financial transactions of applicants, even those who were among 60 million beneficiaries of the first round of the program," Meydari said.

Households who own cars worth more than 2,500 million rials ($19,083) or have a home worth more than 12 billion rials ($91603) in Tehran or nine billion rials ($68,702) in other cities will not receive the aid.

Also, individuals with monthly wages above 40 million rials ($305) who fall in the top three high-income deciles won’t qualify for the government handouts.

Mohammad Shariatmadari, the minister of cooperatives, labor and social welfare, has said people who have travelled abroad at least three times (except for pilgrimages) in the past year won’t be entitled to the benefits either.

Employers with more than three insurees and those who are servicing bank loans worth more than three billion rials ($22,900) also do not qualify for the government’s financial assistance.

Hossein Mirzaie, the spokesperson of the headquarters associated with identifying eligible applicants for the Livelihood Assistance Program, also pointed out earlier that physicians, tenured professors, judges, lawyers, senior civil servants and those holding executive-level positions have been removed from the new aid program.

Subsidized Dollar for Essential Goods Imports

As the president said on Sunday, the government will allocate subsidized currency at the rate of 42,000 rials for the import of essential goods next year, just like it did before.

A total of $14 billion has been allocated for the import of essential goods as part of the next fiscal year's budget, according to Deputy Economy Minister Mohammad Ali Dehqan Dehnavi, Mehr News Agency reported.

"Rice, barley, corn, vegetable oil, oilseeds, animal feed and medicines are among essential goods entitled to subsidized foreign currency rates by the government," he said.

Also known as necessity goods, essential goods are products and services consumers will buy regardless of changes in income levels.

"The government has identified the abovementioned commodities as essential goods needed by people and it has decided to keep their prices in check," the deputy economy minister added.

He described the $14 billion allocation as government subsidy aimed at helping Iranians weather the economic hardship caused by sanctions.

Referring to criticisms leveled against the allocation of cheap foreign currency for importing essential goods, Dehnavi said, "The government has come to the conclusion that in case due supervision over the distribution of certain goods is not possible, those goods will be eliminated from the list of subsidized commodities."

As a case in point, butter, tea and red meat have been removed from the list, he added.

According to the Agriculture Ministry, essential goods’ production and supply are in the best possible condition, IRNA reported.

President of the Islamic Republic of Iran Customs Administration Mehdi Mir-Ashrafi said 13.5 million tons of basic commodities and staples were imported in the first seven months of the current year (March 21-Oct. 22).

“Out of a total of 20 million tons imported in the first seven months of the current year, 13.5 million tons (or 67.5%) were basic commodities,” Mir-Ashrafi, who doubles as deputy economy minister, was quoted as saying by Mehr News Agency.

Imports of staples and basic commodities registered a 22% growth in terms of weight as compared to the previous years, the IRICA president said.

Ever since the imposition of US sanctions last year, the government focused on importing essential goods, mainly food and pharmaceuticals.

On the other hand, imports of what the government deems non-essential goods, mainly those produced domestically have been restricted or banned.

Tough economic sanctions were imposed after the walked out of the landmark nuclear deal Iran signed with the world powers, including the US.

The deal, known as the Joint Comprehensive Plan of Action, was signed in 2015 and implemented a year later. It saw years of international sanctions lifted against Iran. In exchange, the country agreed to limit the scope of its nuclear program.

The US sanctions have targeted Iran's trade by obstructing its trade with most countries.

Budget Ratification

Parliamentarians now have 10 days (as of Sunday) to study the bill and put forth their proposals to the parliament’s special council.

Members of the special commissions of the parliament will then have 15 days to submit their proposals and amendments to the budget bill to Majlis Joint Commission.

The commission is a parliamentary body responsible for reviewing the budget bill as well as the five-year economic development plans proposed by the government before its final ratification.

The commission will have one month to bring the budget bill to the open session of the parliament.

The parliament-approved budget needs the final endorsement of the Guardians Council—the body in charge of ascertaining the constitutional and Islamic nature of all laws.