Gov’t to Submit Revised Budget Bill to Parliament

EghtesadOnline: The government will submit a new budget bill to the Iranian Parliament.

News ID: ۷۸۵۹۵۶

09 February 2021

According to the Iranian president’s chief of staff, Mahmoud Vaezi, the government’s decision to accede to Majlis demand was taken based on promoting “interaction and compromise” and “in order to avoid harm to the public interest”.

Parliament’s work on the fiscal 2021-22 budget bill began amid rising tensions between lawmakers and the government. Each substantial change made in the bill by Majlis Joint Commission—a body comprised of representatives of all parliamentary commissions 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—was criticized by the government and President Hassan Rouhani.

The disagreements reached their peak last week, when the parliamentarians rejected the outlines of the budget and returned it to the government.

The move was the beginning of a serious legal challenge: it’s not clear whether the lawmakers cast their vote against the government’s version of the bill or against the draft prepared by the Joint Commission. Parliament Speaker Mohammad Baqer Qalibaf says the former proposition is true, but according to the precedent and the parliament’s internal bylaw, the latter proposition appears to be true, in which case the government is not obliged to submit a revised budget.

The parliament, on the other hand, said it will have to table a monthly appropriation bill (1/12 of the money in budgetary accounts for one month) if the government fails to hand in a new bill within two weeks.

“It is highly unlikely for the government to be able to introduce new policies within such a short period of time,” Mehdi Pazouki, a professor of economics at Allameh Tabataba’i University, told the Persian-language daily Iran.

“It would benefit the country if the government’ bill is used as a reference and revisions are made in it. The rejection of the bill would send negative signals to the whole economic environment and different markets.”

Pazouki stressed that “as an economic expert, I am totally opposed to the Joint Commission’s revisions”.

“This does not mean that the government’s bill was flawless; the document must have been improved by the commission’s reforms. Bur sadly, the commission’s modus operandi was politically-motivated. Up until now, our foreign politics has weighed over our economy. Today, you have to see the economy being regulated by domestic politics as well,” he added.

Pazouki criticized the idea of drafting monthly appropriation bills as well and said the country used to have regular annual budget bills even during the years of Iran-Iraq war (September 1980-August 1988).

Noting that the parliament needed to accept the responsibility of the consequences of rejecting the government’s bill, the economist said, “A meeting must be held between the heads of three branches of the government: executive, legislative and judicial. The parliament must be called on to pass the improved version of the government’s bill.”

Ali Sa’dvandi, an economist, believes that contradictory, unconventional changes made in the next fiscal bill would turn it into an inflationary budget.

“Those who are new to lawmaking seem to be imposing their views in the name of structural reforms of the budget. They use foreign currency exchange rate to make the budget bigger. In doing so, the budget expanded by 70% in a single year, an unheard-of event in the history of this country,” he said.

“Iran’s budget has not been divided according to its earnings in rial and forex terms. It is possible to employ different foreign currency exchange rates. You can set the exchange rate at 115,000 rials per US dollar and project the sales of 2.3 million barrels of oil [what the government has proposed], or set the forex rate at 175,000 rials per US dollar and envision the sales of 1.5 million barrels of oil [what the Joint Commission has put forward]. In actuality, there is no difference between these two projections.”

Sa’dvandi said officials seem to have reached the conclusion that they are allowed to borrow from the central bank’s monetary base.

“Fears are that no institution would assume the responsibility of several negative implications of budget uncertainty, now that the parliament has rejected the government’s proposal,” he concluded.