In the field of economics, there are two types of challenges. First, urgent issues, and second, long-term problems. In this report, we examine the immediate economic issues facing the Iranian regime’s new government.
The budget deficit and the problem of providing basic goods seem to be the most important immediate challenges facing the government in the field of economy. A budget with a heavy deficit facing Raisi’s government and economic indicators shows the acute conditions that the new government will face at the beginning of its activity, which will begin in the coming weeks.
Meanwhile, the budget deficit, the forecasts of which show a minimum of 300 trillion and a maximum of 450 trillion tomans, is the most important problem facing the new government.
The general budget of the government for 2021 was finalized with resources and expenditures of 1,370 trillion Tomans.
In the meantime, apart from tax revenues and sales of government goods and services, which are projected at about 455 thousand billion Tomans and seem not to be achievable, a significant part of the resources obtained from the transfer of state-owned companies amounting to 256 thousand billion Tomans, sale of securities with 132 trillion Tomans, oil revenues with 349 trillion Tomans and resources from the sale of government property with 45,000 miles are not feasible too.
In this regard, the budget performance of the government in the first four months of this year, although not officially published, but the news and some figures show that the above figures have been achieved to a very small extent which is not significant and will solve nothing.
For example, oil sales revenue is based on daily sales of 1.5 million barrels for $55, while various statistics have stated that the amount of oil sales in 2021 is 700,000 barrels per day and the average price is about $70.
Predicting the continuation of this trend until the end of the year, about 40% of oil revenues, equivalent to about 140 trillion tomans will not be realized.
Regarding the transfer of state-owned companies, although in recent weeks 100 trillion tomans of government debt were transferred to social security in the form of debt relief, the possibility of further transfer, especially through the stock exchange, is difficult due to relatively fragile conditions. Only 100 trillion tomans have been achieved, and no other significant amount can be transferred.
In terms of bond sales, the Central Bank statistics show sales of only 4.9 trillion tomans by the end of July, if the same trend continues, if until the end of the year a figure of more than 15 trillion tomans of bond sales is not achieved, the government will face a deficit of 117 trillion tomans by the end of the year.
Meanwhile, the outgoing government has started the definite expenses foreseen in the budget, including increasing the salaries of employees and retirees, equalizing their salaries, and some other measures, such as increasing job and managerial extras for some groups, which will result in the realization of 100% of current expenses.
In such circumstances, the government has received a salary equivalent to 40 trillion tomans from the central bank at the beginning of the year, which the budget deficit will cause unsettlement and even increase the funds or other inflationary financing methods from the central bank and banks.
The challenge of reducing costs has social and welfare implications for wage earners, and its continuation will lead to budget deficits and rising inflation.
The 13th government’s shortage of basic commodities is set in a situation where the alarm for basic food commodities is already sounding.
Basic food products refer to the price and production of goods such as milk, meat, eggs, etc., the production of which depends on livestock inputs such as cereals.
While Iran is even among the top 10 countries in the world in the production of some of these products such as chicken, but in terms of self-sufficiency in the production of inputs, it is not in a good position at all and this issue has become the Achilles heel for Iranian food security.
Statistics of dependence on the country’s foreign trade statistics last year show that this year, out of a total of about $38.9 billion in total imports of goods, about $12.3 billion, or 31 percent, was allocated to imports of basic goods.
Also, the report of Fars News Agency, quoting the customs spokesman, states that the three goods of corn, barley, and soybean meal as poultry and meat production inputs, weighing more than 13.4 million tons have allocated 58% of the total weight of imports of basic goods to themselves.
What has happened this year is that the dependence of the production of basic goods on the import of livestock inputs has led to an increase in the exchange rate along with general inflation in recent months, causing costs to grow along the supply chain of livestock products.
On July 14 this year, the Ministry of Agriculture Jihad reported that the increase in world prices of imported inputs and other expenditure items in the new year, along with the unprecedented drought in the country, general price inflation and a significant increase in fodder prices compared to the previous year, drastically increase the cost of livestock production.
This, combined with false and seemingly consumer-friendly controls, has led, for example, that farmers were forced to slaughter their livestock and even their productive livestock.
Accordingly, the slaughter of light and heavy livestock in the first two months of 2021 compared to the same period last year increased by 71 and 84%, respectively, and this trend has intensified.
Emphasizing price reform (in the case of raw milk, which can be extended to other parts of the supply chain), the Ministry of Agriculture Jihad has warned that the elimination of productive livestock, in addition to the loss of capital and genetic resources of the country’s livestock, will soon lead to decreased milk and meat production to an alarming point and drastically reduces the total livestock population.
On the other hand, given the 3.5 to 4-year generation gap, there will be no way to compensate for the declining livestock population in the medium term, putting the country at risk of a shortage of milk and meat.