As per the directive issued by President Hassan Rouhani, government organizations, banks and for-profit institutions are obliged to meet their financial needs next year by issuing Islamic bonds (in rial or foreign currency) in the domestic and foreign financial markets and through foreign loans, IBENA reported.
Accordingly, these entities must take measures for put in place and implement performance-based budgeting system. In addition, budget allocation will be devised in a goal-oriented and result-based manner.
To complete development projects, the government has prohibited all new projects until all unfinished and pending projects are completed, according to Financial Tribune.
As per law, the government should send the budget bill in its entirety to the parliament by December 6, but it is unclear whether the deadline would be met.
As outlined in the directive, some of the measures determined by the government to enhance productivity and capabilities of banks and other entities are as follows:
- public sector accounting rules based on final prices shall be put in place and practiced
- prices shall be reformed according to the real prices of goods to augment productivity with emphasis on gradual price hikes to avoid piling pressure on the low-income strata
- allocation of subsidy to government-supported goods by clarifying the share of government in the final prices of the specified goods.
The directive further suggests that priority will be given to uncompleted projects with the potential to contribute to higher production, facilitate services and create jobs. Emphasis should also be shifted to development plans in underdeveloped regions or projects that could be completed by next March.
The directive states that divesting state companies will be accelerated within the framework of Article 44 of the Constitution.
Members of boards of directors of companies are also responsible for preparing the budget in conjunction with the articles of the directive and submitting it to the Planning and Budget Organization after it gets passed in the general meeting.
Budget Outline
As outlined assHhshshhkhhj in the directive, the budget bill will focus on promoting economic stability, taming inflation, supporting production and job creation, actively opposing sanctions and supporting the people’s livelihood.
"It is necessary that next year’s budget for government organizations move toward speeding up general policies of the Resistance Economy and implementation of Article 44 policies, while maintaining financial discipline, eliminating unnecessary expenses, improving the business environment, promoting social capital, using the sanctions to curb dependence on oil, design foreign exchange policies to protect foreign currency resources, employing financial and monetary policies to end the recession and tame inflation, and reforming the government’s interaction with banks," the directive said.
Boosting the capital market to help curb liquidity growth, increasing the government’s sustainable income and using them for economic growth and prosperity, focusing on major production sectors, reforming the subsidy and pricing system, reforming tariff and taxation systems, identifying and implementing solutions to increase public resources are the other recommendations of the government.
As mentioned in the directive, monetary policies next year will be implemented with the aim of curbing inflation and cutting rampant liquidity. The government is determined to reform its relations with banks in that the government’s direct and indirect dependence on bank resources reaches to a minimum and effective measures shall be taken to address banking challenges. Moreover, government bodies are banned from taking on new debt or issue guarantees without PBO approval.
The International Monetary Fund last month predicted that Iran's economy will sink deeper in the red ink due to the US sanctions. In its World Economic Outlook, the IMF said the oil-dependent economy of the Islamic Republic is expected to shrink by 1.5% this year and by 3.6% in 2019.
In May, before US President Donald Trump announced the new sanctions against Tehran, the IMF had projected Iran's economy would grow by 4.0% in 2018 and again the next year.
The IMF said Iran’s economy is now expected to contract over the next two years "on account of reduced oil production, before returning to modest positive growth in 2020-23".