Iran Economy NewsIran’s parliament signs off on $508 billion budget based...

Iran’s parliament signs off on $508 billion budget based on oil price at $81.5 a barrel


AP: Iran’s parliament has signed off on a $508 billion budget bill that is about 40 percent bigger than that approved the previous calendar year, state media reported on Monday.

The Associated Press

TEHRAN, Iran (AP) — Iran’s parliament has signed off on a $508 billion budget bill that is about 40 percent bigger than that approved the previous calendar year, state media reported on Monday.

The increase in the new budget, which runs through March 2012, is a result of a sharp reduction in energy and food subsidies and an increase in the global price of oil, the official IRNA news agency said, adding that the budget was based on an oil price of $81.5 per barrel. Oil prices have spiked well above $100 per barrel on the back of the unrest ravaging the Arab world.

President Mahmoud Ahmadinejad submitted a $540 billion budget to the parliament on Feb. 20, hoping that the reduction in subsidies and price increases on goods would bring in an additional $62 billion for the year.

Lawmakers, however, cut the proposed budget to $508 billion amid worries of stoking inflation, and agreed to factor in $54 billion from the price hikes and subsidy cuts.

The budget must still be approved by the Guardian Council, a constitutional watchdog, before becoming law.

Prominent lawmaker Ahmad Tavakoli said the $54 billion figure was still too high, arguing it would drive inflation higher and increase the economic strain on the country’s 76 million people.

The government began slashing energy and food subsidies in December — a step Ahmadinejad said was necessary because the country could no longer afford to sustain a plan that officials say costs the government about $100 billion per year. Experts however believe the subsidies cost the country about $20 billion.

The government earned $20 billion from slashing subsidies last year, and Ahmadenijad has vowed to eliminate all the subsidies by the end of his term in 2013.

Under the plan, the government says some of the money saved is returned to the people through cash payments. Every Iranian currently receives about $45 a month to at least partially offset the rise in commodity prices.Since the cuts went into effect on Dec. 19, gasoline and bread prices have quadrupled.

The cuts are widely seen as further pressuring Iranians at a time when the country is already squeezed by sweeping international sanctions imposed over its disputed nuclear program.

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