Iran Economy NewsIran Budget Approved, but Its Not a Good Thing

Iran Budget Approved, but Its Not a Good Thing

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The Iranian parliament (Majlis) has finally approved the government’s 2021-22 budget bill following a month of arguments between the members of the parliament and the members of President Hassan Rouhani’s cabinet.

On February 16, the parliament’s official news agency, Khan-e Melat, reported that Rouhani’s bill was rejected, so the cabinet “implemented Majlis’s opinions”, which allowed the bill to be passed, and that the parliament was satisfied with the budget reform.

So, what was holding up the passage of the bill? Well, there were two disputed issues:

  • The source of the regime’s income in the budget
  • The US dollar exchange rate specified by the government

Where is the money coming from?

MP Allahverdi Dehghani said that the budget was based on selling 2.3 million barrels of oil, with over half of the regime’s proposed income from that one source, but it does not look likely that international sanctions on Iran’s oil exports will be lifted, so how can the regime be relying on so much of this income?

Read More:

Iran’s 2021-22 Budget Bill, A Perfect View of Government’s Dilemmas and Crises

In a previous session, Budget and Planning Organization chief Mohammad Bagher Nobakht had objected to this concern, citing secret reports, but then admitted that the regime’s oil incomes have crashed dramatically in the past couple of years.

Parliament Speaker Mohammad Bagher Ghalibaf replied: “If you know that our oil exports are at a minimum, why have you planned to sell 2.3 million barrels of oil? How has the government scheduled its expenses based on the revenue that does not exist?”

This discrepancy was not solved, however, as if the MPs just forgot about funding the budget.

How many rials to the dollar?

Back in 2018, the Iranian government artificially set the exchange rate at 42,000 rials per US dollar with the hope of steadying the economy. This didn’t work, which should have been obviously at the start, and now the free market is trading at 260,000 rials per US dollar.

This has led to a black-market trade for regime-affiliates who make huge profits borrowing at the government rate without paying back the necessary money.

The state-run Resalat daily wrote: “Since 2018, the profit generated from the 42,000-rial exchange rate is ten times larger than the entire yearly cash handouts being offered to the needy, and it has been deposited into the pockets of individuals who have access to this currency. The [regime’s affiliates who] had access to the 42,000-rial dollar were able to import their goods at this rate but sold it at free-market rates.”

There has been no resolution to the exchange rate difference or the problems it caused.

How was the budget ever approved?

As it turns out, it was an under-the-table deal, where the rial exchange rate would remain at 42,000 for six months, allowing the regime to profit at the expense of the people.

It seems an odd choice because they know the people can see what they’re doing and hate it, as well as hating the regime for many other legitimate reasons. The people are getting angrier and the budget may push them over the edge.

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