Given that both Iranian and international institutions expect oil prices to remain south of $55 per barrel, the government’s move to calculate the budget based on that price in its bill is risky. Indeed, the Rouhani administration would lose about $446 million for each dollar that oil prices drop. For instance, a $5 drop would equal the spending for infrastructure projects in the first half of the current Iranian year.
Moreover, it should be noted that the government setting the dollar rate at 35,000 rials for next year’s budget at a time when it trades for 43,000 on the open market is indicative of faulty estimates. Indeed, the inclusion of 100 trillion rials ($2.77 billion) as revenue in other parts of the budget bill based on calculations of a dollar exchange rate of 39,000 rials suggests that the latter will be the central bank’s real conversion rate in the coming Iranian year.
Rouhani’s budget bill has huge holes since effective measures to address the challenges facing the Iranian economy have not been devised. Indeed, solutions to issues pertaining to water shortages and the environment, pension funds, budget deficits and the banking crisis, to name just a few problems, have not been addressed in an open and clear manner. When scrutinizing the budget proposal, it is thus evident that the country’s age-old dilemmas continue to be ignored and that there is still a lack of determination to tackle them in the foreseeable future.