Gov’t Submits $37 Billion Budget Bill to Parliament
EghtesadOnline: Vice President for Parliamentary Affairs Hosseinali Amiri submitted the budget bill for the next fiscal year (March 2021-22) to the parliament on Wednesday.
Unlike previous years, President Hassan Rouhani did not show up at the parliament for the budget day upon the advice of the National Coronavirus Headquarters.
In the next fiscal year (starting 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 ($33.65 billion at the market exchange rate of 250,000 rials per US dollar).
Add to this, 884 trillion rials ($3.53 billion) were earmarked for ministries and governmental institutions, which take the total sum of the general budget to 9,298 trillion rials ($37.19 billion).
The budget of state companies, banks and for-profit organizations has been put at 15,619 trillion rials ($62.47 billion).
All in all, the ceiling set for the government’s total budget is at 24,357 trillion rials ($97.42 billion).
Tax earnings have been set at 2,515 trillion rials ($10.06 billion), including 591 trillion rials ($2.36 billion) from tax on legal entities, 491 trillion rials ($1.96 billion) from income tax, 238 trillion rials ($952 million) from wealth tax, 235 trillion rials ($940 million) from tax on imports and 957 trillion rials ($3.82 billion) from tax on goods and services.
Revenues from the sale of capital assets have been projected to stand at 2,255 trillion rials ($9.02 billion). The transfer of capital assets consists of several sections, including the domestic sale and export of oil products. Notably, the government has projected that its oil and oil products revenues will stand at 1,992 trillion rials ($7.96 billion) next year.
The share of National Development Fund of Iran from oil resources (crude oil, gas condensates and natural gas exports) has been set at 20%. The government is obliged to pay 14.5% of oil revenues to the National Iranian Oil Company and 14.5% of the revenues earned from natural gas exports to the National Iranian Gas Company.
Earnings from the transfer of financial assets, including sales of treasury bonds, are projected to reach 2,984 trillion rials ($11.93 billion).
In terms of expenditure, the government will spend 1,003 trillion rials ($4.012 billion) on financial assets, including payment of bonds interest.
It has considered an average rise of 25% in the wages of employees next year. Next year’s salary of government employees and pensioners should not be less than 35 million rials ($140) per month compared with the current year’s 28 million rials ($112).
Income tax exemption for government employees has been set at 480 million rials ($1,920) per year. The current year’s cap on public and private sector income tax exemption is 360 million rials ($1,440) per year.
The government will pay 428 trillion rials ($1.71 billion) in cash and non-cash subsidies next year as per the budget bill.
On top of that, it will allocate 310 trillion rials ($1.24 billion) for the implementation of the so-called Livelihood Assistance Program, i.e. cash transfers as compensation for higher gasoline prices introduced in November 2019.
The government has also envisioned 70 trillion rials ($280 million) for “production and employment, support for businesses hit by coronavirus crisis and rail transportation” and 263 trillion rials ($1.05 billion) for “Health Ministry, health insurance, the so-called Family Doctor plan, subsidies on pharmaceuticals and baby formula, treatment of patients with special diseases, population policies and procurement and production of Covid-19 vaccine.”
Parliamentarians now have 10 days (as of Wednesday) to study the bill and put forward their proposals to the parliament’s special commissions.
Members of the special commissions will then have 15 days to submit their proposals and amendments to the budget bill to Majlis Joint Commission.
The commission is a parliamentary body responsible for reviewing the budget bill as well as the five-year economic development plans proposed by the government before its final ratification.
The commission will have one month to bring the budget bill to the open session of the parliament.
The parliament-approved budget needs the final endorsement of the Guardians Council, the body in charge of ascertaining the constitutional and Islamic nature of all laws.
Sources of Financing Cheap Imports
The government was allowed to tap into revenues gained from the export of crude oil, gas condensates and natural gas to allocate cheap foreign currency at the rate of 42,000 per US dollar to import essential items as per budget laws pertaining to the fiscal years ending March 2020 and 2021.
However, it will use resources generated from crude oil exports only to subsidize these imports next year (March 2021-22).
President Hassan Rouhani has highlighted the new budget bill’s structural reforms.
“Expenditure reduction, improving revenues, reducing government intervention [in economic activities], expanding electronic government, cutting dependence on oil revenues, boosting production and implementing the policies of Resistance Economy [a set of principles outlined by the Leader aimed at bolstering domestic production and cutting dependence on oil revenues] underpin the next year’s budget,” he was quoted as saying by the Persian daily Iran.
According to Mohammad Baqer Nobakht, the head of Plan and Budget Organization, the main resources to finance the next year’s budget will be oil, tax and treasury bonds.
The allocation of cheap subsidy to impor essential goods will continue; the US dollar conversion rate will be set at 115,000 rials and the price of oil is at $40 per barrel in next year’s budget, he added.
Following the US withdrawal from the Joint Comprehensive Plan of Action, the formal name of Iran nuclear deal, in 2018 and the depreciation of local currency against foreign currencies, the government began the policy of subsidized imports.
The government intends to pursue the scheme next year as suggested in the draft of the budget bill. But, what will be different next year compared with the past two fiscal years is that the resources to finance the plan would be narrowed down to gains from crude exports.
The government supplied $15 billion to import essential goods in the year ending March 2020 and was supposed to allocate $10.5 billion in the current year. However, as per the decision taken by the government’s Economic Coordination Headquarters in the month ending May 20, the sum has been reduced to $9 billion, Fars News Agency reported.
In the new budget bill, PBO has not projected a specific figure for crude oil revenues, suggesting that the figure will be finalized when the government submits the bill to the parliament.
PBO has recommended that the government withdraw €4.28 billion from the National Development Fund of Iran (the country’s sovereign wealth fund) to meet some of its budgetary commitments for next year, which marks a 53% growth compared with the corresponding figure in the current year’s budget.
Another key recommendation is the allocation of €1 billion to tackle the associated health and economic consequences of the new coronavirus pandemic, just like the current year.