Rouhani’s first budget reflects realism, discipline
Iranian President Hassan Rouhani’s budget submission to the parliament implies hope for sanctions relief and private sector investment.
President Hassan Rouhani presented the very first budget bill of his government to the Iranian Majles on Dec. 8. (Incidentally, after eight years of defiance and delays in budget debates caused by the Mahmoud Ahmadinejad administration, the new government managed to return to the normal process of presenting the budget bill.)
In this short piece, we will dissect the proposed bill. Evidently, over the next few weeks, the bill will be subject to parliamentary debates and amendments; however, one can detect the government’s preferred approach to key aspects of the country’s economy.
First and foremost, the budget bill has been based on a zero deficit, which could be understood as an attempt to return the missing discipline to state finances. In his speech to the Majles, Rouhani stated that budget deficits and continuous borrowing from the Central Bank were among the main reasons for intensifying inflation and stagnation. As such, it was a positive sign that the government was opting for zero deficit. However, it would not be the first time that a planned zero deficit turned into an actual budget deficit, especially considering the enormous challenges faced by the government.
As the following table indicates, in terms of general state revenue (from oil and gas exports, taxation and privatization), the government has projected a 17% decline compared to the current Iranian year. This is partly related to a lower allocation for privatization proceeds, but also a more realistic reflection of the state’s capability to generate revenues for the treasury.
