New PBO Chief Presents Overview of Budgeting, Financial Challenges

EghtesadOnline: Masoud Mir-Kazemi, the new head of Plan and Budget Organization, has made his first comments on the fiscal budget and its financal challenges.

News ID: ۷۸۶۹۲۴

01 September 2021

“Last [fiscal] year [March 2020-21], government expenditure stood at 5,620 trillion rials [$20.81 billion], of which 30% were funded through the sales of financial assets like bonds and 70% were met from sustainable resources. Two ceilings have been set for the current fiscal year’s expenditure: one 9,370 trillion rials [$34.7 billion] and the other 12,770 trillion rials [$47.29],” he was quoted as saying by Fars News Agency.

“Over the first 139 days of the current year, a total of 2,800 trillion rials [$10.37 billion] have been spent, of which 2,200 trillion rials [$8.14 billion] came from reliable resources, 850 trillion rials [$2.14 billion] from the sale of financial assets and the remaining was financed through petty cash fund. The whole thing indicates that it was not possible to supply the budget from the beginning of the year [March 21]. The projected revenues from oil sales did not materialize; only 15% of revenues were realized in 139 days.”

Noting that the budget needs to become more sustainable and expenses must be kept in check, Mir-Kazemi said, “The expenditure budget of the government stood at 890 trillion rials [$3.29 billion at the current exchange rate] in the fiscal 2012-13. How come it has reached 9,370 trillion rials in the fiscal 2021-22?”

The official noted that the average economic growth over the past eight years was between 0% and 0.8% and the inflation rate was mostly double-digit.

“When the resources are not sustainable, money supply and inflation increase; the Gini Index was on the rise over the past eight to 10 years, suggesting that the economic inequality has been in favor of the rich,” he added.

Asked about the new government’s approach to tackle the current year’s budget deficit, the official said, “We need to control our expenses and create less money as it is the evil of the economy that increases households’ expenses and hurts employment, in the absence of economic growth. We need to break this vicious cycle at one point and try to slow the pace of money supply growth.”

Stressing that the provision of emergency budget for purchasing Covid-19 vaccines and essential goods is one of our top priorities, the official said the essential goods reserves have declined and should be improved to a desirable level.

Referring to the small capital expenditure budget, Mir-Kazemi said, “Considering the large number of incomplete projects, the current allocation of budget to development projects might prolong the duration of these project for up to 100 years. Therefore, high-priority projects must be identified in each province and the public should participate in their completion.

He noted that the new government has yet to agree upon submitting an amendment to the current year’s budget to the parliament.

“We’ll try to organize the current spending package. Revenues stipulated in the budget will definitely not materialize, therefore expenses must not remain at the current ceiling. We’ll take measures within the framework of the law and will make some changes, if need be,” he said.

“Sanctions are one of the causes of the current situation, but not the main cause. Iran is a rich country with immense natural resources of hydrocarbons, mines, human capital and strategic geographic location. The country is among the top 10 in the world in the production of a number of agricultural products so people must not live in poverty.”

Admitting that numerous problems need to be resolved, Mir-Kazemi said Iran is not a poor country.

“The value of hidden subsidies in Iran stands at $63 billion. Subsidies that are being allocated to pharmaceuticals and other products reach 2,900-3,000 trillion rials [$10.74-11.11 billion]; a government that can support such subsidies can definitely carry out other tasks,” he said.

“If you expect the 13th government [the new administration of President Ebrahim Raeisi] to follow the path of previous governments, the current conditions will persist; people won’t accept this.”