Rouhani’s Bad News Budget

Despite Rouhani’s success so far in keeping current expenditures and payrolls in check — both major components of general budget costs — it seems he is beginning to lose sight of this important task. Current spending in the coming Iranian year is bound to continue to hover around $76 billion, while discretionary outlays are expected to remain at some $6.5 billion.

The latter sum is needed to cover civil servant salaries and pensions, repay outstanding debts and support civil engineering projects. According to IPRCI’s figures, the government will need to spend $25 billion in all these areas — almost four times what it anticipates.

As for infrastructure spending, it appears there will be a sharp decline. This is both due to the volatility of available development funding and a reduction in its share of total government expenditures. Having said that, Adel Azar, head of the Supreme Audit Court, remarked to the parliament, “On paper, the budget increases every year, but in practice, year by year, government credits for construction projects are reduced, with an average of 87% of the state budget devoted to cost credits.” With the current budgeting, Azar reiterated, development projects will have to be shut down.

Azar has also criticized the budget’s negative operational balance as another symptom of its ills. He said, “The operational balance, which is the difference between actual revenues and credit costs, has risen annually and reached $19 billion over 2016-17. … So far, to finance the budget, oil and state companies have been sold. But now, there is the odd occurrence of credit [being] generated from the sale of bonds and treasury bills. This means that we settle bonds for [other] bonds and [thus] sell the future of our children to fund [current expenditures].”

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