Inflation-Budget Deficit Correlated
EghtesadOnline: The government’s budget deficit will eventually lead to inflation and increase the exchange rate, but the point is that the government expenses will be paid from people’s pockets.
Addressing budget deficit and making a return to financial discipline are the main solution to inflation.
In Iran, revenues are divided into those derived from oil sales and taxes. When the government sells oil, it gives the foreign exchange income to the Central Bank of Iran and exchanges it at a determined rate in rials to pay employees. When expenses outweigh revenues, the government faces a budget deficit.
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