Rouhani’s Budget Proposal Reverses Declining Reliance on Oil

By Alireza Ramezani for Al-Monitor. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iran Business News.

Iranian President Hassan Rouhani presented the last budget bill of his current term to the parliament Dec. 4. The state budget for the next Iranian year, beginning March 21, 2017, will exceed 10 quadrillion rials ($328 billion at an exchange rate of 33,000 rials to the dollar) for the first time in Iran’s history.

It is 10.9% larger than the current year’s budget, but it looks to be more realistic as government revenue is projected to increase only by 1.5% while reliance on tax revenues will grow steadily.

Thanks to the lifting of nuclear-related sanctions Jan. 16 as part of the Joint Comprehensive Plan of Action, the Rouhani administration seems to have felt less pressure preparing the budget bill. Indeed, the figures released by the administration indicate that it has adopted neither a contractionary nor an expansionary fiscal policy for the coming year.

The proposed budget forecasts 7.7% growth in gross domestic product (GDP) and expansion of the money supply by 19%, with an expected inflation rate of 7.6%, which is slightly less than the current level.

The prospect of increasing oil revenue, the gradual repatriation of unblocked state assets abroad and projected 12.3% growth in investment have given administration officials hope that they will be able to hit their established targets.

To refinance part of Iran’s hefty debt to contractors, the administration expects the parliament to let it issue 325 trillion rials ($9.8 billion) in bonds. The budget bill also calls for lawmakers’ approval to allow the administration to issue another 50 trillion rials ($1.5 billion) in Islamic treasury bills to pay off the bonds as they mature.

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