Iran has drafted a state budget for next fiscal year that is 2.6 percent smaller than the plan for this year, as low oil prices put pressure on the country's finances. The budget for the year starting on March 20 has been tentatively set at 2,670 trillion rials, government spokesman Mohammad Baqer Nobakht was quoted as saying by state news agency IRNA on Tuesday.
That compares with an original plan for this year of 2,740 trillion rials, not including state-owned enterprises. The budget must be approved by parliament, and figures could change in the three months before it is due to come into effect. Nobakht said the budget was based on an official exchange rate of 29,970 rials to the dollar, giving it a value of $89.1 billion.
Brent oil's fall to an 11-year low of just above $36 a barrel this week threatens new damage to Iran's export revenues, which have been hit for decades by international sanctions imposed over its nuclear programme. IRNA did not report projections for total state revenues and the deficit in next year's budget, but said oil revenues were estimated at $22 billion. The administration of President Hassan Rouhani, who took office in 2013, has been battling to keep the budget deficit down by restraining spending.
Iran is expected to run a budget deficit of 2.2 percent of gross domestic product this year, the International Monetary Fund estimated this week. Rouhani's administration may also be cutting next year's budget to avoid a surge in inflation. International sanctions on Iran are expected to be lifted early next year, causing billions of dollars to flow back into the country. "According to our predictions, the rate of inflation will fall below 11 percent in the coming year and economic growth will reach 5 to 6 percent," IRNA quoted Nobakht as saying. Inflation is about 15 percent while growth is minimal.
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