PBO: Gov’t Met 98.6 Percent of Fiscal 2020-21 Budget Outlay
EghtesadOnline: The government met 98.6% of the fiscal 2020-21 budget outlay, despite the significant shocks of US “maximum pressure” campaign and the coronavirus pandemic, says Hamid Pourmohammadi, the deputy head of Plan and Budget Organization of Iran.
Referring to the decline in oil exports, he said, “Iran used to export 2.68 million barrels of crude per day as of May 2019, but oil exports and the country’s petroleum tankers were sanctioned.”
Pourmohammadi blamed the hike in foreign exchange rate to 300,000 rials per US dollar on the spread of Covid-19 in February 2020.
Iran is starting to build its offshore oil storage as chances of a new nuclear deal grow higher, which will enable it to reclaim its lost oil market share, trading and shipping sources said on May 24, S&P Global Platts reported.
Iran is preparing for a quick ramp-up of output and exports as the US, Iranian and European negotiators kick off the fifth round of indirect talks this week in Vienna, Austria, over the deal, known as the Joint Comprehensive Plan of Action. Iranian floating oil storage has more than doubled since mid-January when Joe Biden became US president.
Noting that only 2% of the projected figure on oil sales were realized last year, i.e., 120 trillion rials ($524.01 million), the PBO official said, “Up until a few months ago, we used to sell diesel at 46 cents, which at the start of last fiscal year had plummeted below 16 cents.”
On May 20, Iranian President Hassan Rouhani said a "main agreement" will reinstate the nuclear deal, as the US has broadly committed to lifting its sanctions targeting Iran's oil, petrochemical and shipping sectors. But a final deal has yet to be struck, with discussions ongoing over details. Iranian crude and condensate exports will rise from 600,000 b/d in May to 1.5 million b/d by December after a framework deal by June outlines the terms of full sanctions relief by September, according to S&P Global Analytics.
"Interim oil sanctions waivers are also possible, as Iran progresses toward full nuclear compliance," it said in a recent note.
This comes amid a steady increase in Iranian oil exports this year, which have risen to over 1 million b/d in some months, with China a particularly eager buyer at discounted prices, according to market sources.
Iranian crude and condensate exports were averaging 2.90 million b/d in early May 2018, when US under the Trump administration withdrew from the Iran nuclear deal.
Iran pumped 2.43 million b/d of crude oil in April, according to the monthly S&P Global Platts survey of OPEC output, a rise from about 2 million b/d at the end of 2020. Immediately prior to the US reimposing sanctions in 2018, Iran pumped at a peak of 3.8 million to 3.9 million b/d.
“Despite all these hardships of last year, spending totaled 5,630 trillion rials [$24.58 billion]. The budget law had projected 5,710 trillion rials [$24.93 billion] in expenditure which means 98.6% of it were materialized. Capital expenditure budget was set at 880 trillion rials [$3.84 billion], which in actuality hit 921 trillion rials [$4.02 billion],” Pourmohammadi was quoted as saying by Fars News Agency.
According to Plan and Budget Organization, the government registered 7,195 billion rials ($31.28 million) in surplus in its fiscal 2020-21 budget.
The deputy head of PBO said the average pay of government employees in the month ending Oct. 21, 2020, increased by 34% compared with the same period of the year before and salaries lower than 40 million rials ($175) per month went up by 53%.
An aggregate of 2,020 trillion rials ($8.82 billion) worth of bonds were sold last year; the heads of three branches of the government gave the green light for bond sales worth 1,250 trillion rials ($5.45 billion). The government earned 350 trillion rials ($1.52 billion) from privatization deals.
The budget had predicted the allocation of 720 trillion rials ($3.14 billion) from the National Development Fund of Iran, the country’s sovereign wealth fund. A total of 320 trillion rials ($1.39 billion) were withdrawn from the fund, i.e., 40% of the projected figure.
A total of 2.3 million people dropped out of the labor market in the aftermath of coronavirus disease and the economic participation rate dropped to 41% in Q1 of last year from 44.7% of the previous year.
Cash subsidies worth 1,084 trillion rials ($4.73 billion) were paid last year and unemployment benefits were doled out to 800,000 workers. However, according to the Central Bank of Iran, the economy registered growth.
“No economy, even US, China and Russia’s economies could endure these two shocks [sanctions and coronavirus],” he said.
No CBI Lending; Over $8b in Tax Revenues
Economy Minister Farhad Dejpasand says last fiscal year’s (March 2020-21) budget was balanced without borrowing a rial from the Central Bank of Iran.
“The government managed to successfully pass through the crisis-ridden fiscal year of 2020-21 … Instead of borrowing from the central bank, we borrowed from people by selling bonds,” he was quoted as saying by IRNA.
“The government earned 107% of the expected income from taxation in the last fiscal year. Earnings from privatization deals were six times more than the year before [March 2019-20].”
According to Mohammad Masihi, the deputy head of the Iranian National Tax Administration, a total of 1,925 trillion rials ($8.3 billion) in tax were collected in the last fiscal year (March 2020-21), indicating a 37% increase compared with the year before.
The government’s tax revenues consist of its returns from “direct taxation” and “tax on goods and services”. Direct taxes include “tax on legal entities”, “income tax” and “wealth tax”.
Masihi said direct tax earnings stood at 1,190 trillion rials ($5.17 billion) in the year ending March 20, to account for 136% of the projected income in the budget law and 46% more than direct tax revenues of the preceding year (March 2019-20).
“Tax on goods and services generated 735 trillion rials ([$3.2 billion] for the government, accounting for 80% of the expected budgetary figure and 23% more than the corresponding revenues in the previous fiscal year,” he was quoted as saying by Fars News Agency.
Referring to the sub-sections of direct tax revenues, the official said taxation of legal entities generated 560 trillion rials ($2.4 billion) during the period under review, indicating a 27% growth year-on-year.
A total of 395 trillion rials ($1.7 billion) in income tax were collected as well, registering a 36% year-on-year rise.
Last fiscal year’s wealth tax income stood at 232 trillion rials ($1 billion), showing a 178% increase compared with the year before.
The official blamed the coronavirus pandemic and decline in transportation and fuel consumption for a 14% decrease in petroleum products’ tax revenues and said INTA collected 60 trillion rials ($266 million) from taxation of petroleum products last year.
“Self-declaration of tax returns accounted for 70% of the country’s tax revenues, which allowed INTA to focus on improving tax collection from major taxable persons. INTA also managed to collect 100 trillion rials [$400 million] from overdue tax returns,” Omid Ali Parsa, the head of the Iranian National Tax Administration, was quoted as saying by Mehr News Agency recently.
Noting that tax evasion accounts for an estimated 400-450 trillion rials ($1.7-2 billion), the official said, “Up to 40,000 bank accounts with transactions of more than 50 billion rials [$200,000] per year will be investigated technically and professionally in order to prevent tax evasion.”