Analyzing Iran’s new state budget

Al-Monitor | : On Dec. 8, President Hassan Rouhani presented his budget bill for the next Iranian year — starting March 21— which he termed a tool of “resistance against US sanctions.” Will the bill’s new approaches positively impact Iran’s sanctions-hit economy?

Iran’s budget bills consist of two parts, i.e., a smaller part that reflects the government’s financial framework and a much larger segment that covers the forecasts for all public entities. The total bill has a volume of 19,880 trillion rials ($473 billion at the official rate of 42,000 rials to the US dollar). The segment on public companies amounts to 14,250 trillion rials and the government to 5,630 trillion rials. Out of the government budget, 790 trillion rials are dedicated to specific items (such as income from long-term investments that also have specific utility in the budget, i.e., pensions). The rest of the budget is the focus of this article, i.e., the government’s general budget, which is proposed to be 4,840 trillion rials ($115 billion).

The general budget is approximately 25% higher than the amended budget for the current Iranian year. With an official inflation of around 40%, it is clear that the real impact of the government on the economy as a whole will be in decline. Furthermore, with a proposed average 15% increase in the salaries of civil servants, the government consolidates the further loss in purchasing power of lower income classes, which will partly be compensated through the increase in direct cash handouts.

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