MRC: 62% of Gov’t Employees Among Top 3 Income Deciles

EghtesadOnline: Majlis Research Center, the research arm of Iranian Parliament, cast serious doubt over a 25% pay increase for civil servants proposed by the government in the budget bill for the next fiscal year (March 2021-22).

News ID: ۷۸۵۶۹۸

01 January 2021

Data regarding household income and expenditure in the year ending March 2020 show around 80% of government workers fall in top five income deciles and 60% in top three deciles, MRC said in a recent report.

“The fierce competition for grabbing positions at governmental organizations is a testament to this fact. Statistics also show 80% of families with government employee as the head of the household own a car whereas the ratio stands at less than 45% for other families,” the report said.

“That being the case, one of the critical decisions that must be made about the budget bill of the next year is for the policymakers to choose between two options: increasing public employees’ salaries at the cost of creating inflation for all members of the public or introducing a reasonable pay rise in accordance with the government’s resources and preventing inflation.”

The center also recommends that policymakers choose between increasing government employees’ wages and lending support to households of modest means, particularly in the time of coronavirus crisis.

Vice President for Parliamentary Affairs Hosseinali Amiri submitted the budget bill for the next fiscal year (March 2021-22) to the parliament on December 2.

In the next fiscal year (to start March 21, 2021), the operating budget (including revenues derived mainly from taxation and exports at the disposal of the government) has been projected to stand at 8,413 trillion rials ($32.35 billion at the market exchange rate of 260,000 rials per dollar).

Add to this, revenues earmarked for ministries and governmental institutions worth 884 trillion rials ($3.4 billion) take the total sum of the general budget to 9,298 trillion rials ($35.76 billion).

The budget of state companies, banks and for-profit organizations has been put at 15,619 trillion rials ($60 billion).

All in all, the ceiling set for the government’s total budget is at 24,357 trillion rials ($93.68 billion).

The Joint Commission of the Iranian Parliament agreed in principle with the budget bill of the upcoming fiscal year submitted earlier in December.

Twenty-three members of the commission voted for, 19 voted against and one abstained from voting, IRNA reported.

Majlis Joint Commission, composed of representatives of all specialized parliamentary commissions, is responsible for reviewing budget bills as well as five-year development plans proposed by the government before they are put to a vote by MPs.

“The speaker of parliament [Mohammad Baqer Qalibaf] asserted in this morning’s closed session that the government and Majlis will work together to provide the needed resources [to balance next year’s budget],” Hossein Goodarzvand Chegini, a member of the commission, said.

The parliamentary approval comes after the budget bill came under fire by experts and even Majlis Research Center for being “too optimistic” on the side of revenues.

As of Jan. 2, specialized committees will iron out the details of the budget, the official added.

Among the fundamental flaws enumerated by MRC in the budget bill are significant structural budget deficit (close to 50%); overestimation of revenues generated by oil exports and a 30% increase in budgetary dependency on oil (including the domestic sales of oil bonds); a fall in government investment in the share of civil development funds from general expenditure—from 15% in the Budget Law of the fiscal 2020-21 to 11% in the budget bill of the fiscal 2021-22; considerable rise in current expenditure (60% growth); a decline in the share of tax revenues from budget’s general resources—from 36% in the Budget Law of fiscal 2020-21 to 27% in the budget bill of the fiscal 2021-22; a surge in operational deficit, which is against the objectives set in the Sixth Five-Year Development Plan (2017-22); the projection of significant resources from the sale of oil bonds and creation of debt adjusted with foreign exchange rate fluctuations; and the budget going in a direction opposite to budgetary structural reforms.

Rich-Poor Inflation Gap at 9.3%

Income deciles are groupings that result from ranking either all households or all persons in the population in the ascending order according to income, and then dividing the population into 10 groups, each comprising approximately 10% of the estimated population.

According to the Statistical Center of Iran’s latest report, the average annual inflation gap among income deciles stood at 9.3% in the ninth Iranian month (Nov. 21-Dec. 20), indicating a 0.4 percentage point increase compared with the previous month (8.9%).

The inflation gap in “food, beverages and tobacco” group among income deciles increased by 0.4 percentage points and that of “non-food and services” group widened by 1.5 percentage point compared with the month before.

The average goods and services Consumer Price Index in the 12-month period ending Dec. 20 increased 27.9% for the first decile (those with the lowest income) while it grew 37.2% for the 10th decile (those with the highest income).

“Food, beverages and tobacco” group inflation increased 29.5% for the first decile and 25.6% for the 10th group. “Non-food and services” group inflation grew 26.3% for the first decile and 40.3% for the 10th group.

Average inflation rates grew by 28.4% for the second decile compared with last year’s corresponding period; 28.6% for the third decile; 28.8% for the fourth decile; 28.9% for the fifth decile; 29.3% for the sixth decile; 30.4% for the seventh decile; 31.1% for eighth decile and 33.2% for the ninth decile.

The highest overall CPI (using the Iranian year to March 2017 as the base year) stood at 301.8 for the 10th decile and the lowest calculated was 279.1 for the first decile. The first and third deciles registered a 3.1% month-on-month inflation, second 3.2%, third 3.1%, fourth 3%, fifth 2.8%, sixth 2.7%, seventh 2.4%, eighth 1.9% and ninth 1.2% while the 10th decile saw monthly deflation of 0.2%.

The year-on-year inflation rates increased by 44.5% for the first decile during the month under review, 45% for second, 44.6% for third, 44.1% for fourth, 44% for fifth, 43.9% for sixth, 45.1% for seventh, 45.6% for eighth, 48.1% for ninth and 52.8% for the 10th decile.