In the absence of statistics from Iran’s Central Bank and despite the government’s false claims that the budget for 2022 (1401 in the Persian calendar) has been “fully accommodated”, the deputy of the regime Planning and Budget Organization said recently that last year’s budget deficit was 7,940 trillion rials (around $22.6 billion at the then exchange rate).
According to the regime’s semiofficial ISNA news agency, Rahim Mombeyni detailed the budget deficit on May 20, explaining that the general budget deficit was about 3,040 trillion rials, but with the targeted 1,900 trillion rials for social welfare commitments and 3,000 trillion rials for the government’s commitments to the banks, the actual budget deficit totaled to around 7,940 trillion rials. This figure is more than double the budget deficits of previous years, and such a rise in the budget deficit comes at a time when regime officials had repeatedly assured that the 2022 budget did not have any deficit.
Masoud Mir Kazemi, the former head of the Planning and Budget Organization, had denied reports of a 4,000 trillion rial (around $11.4 billion at the then exchange rate) budget deficit in January 19, adding that those who claimed such a deficit had “wrong information” and even claiming that “we do not have any budget deficit whatsoever.”
One day prior to Mir Kazemi’s false claim, Hamidreza Haji Babaei, head of the Majlis (parliament) Planning, Budget, and Calculations Commission, had also claimed that there was no budget deficit in 2022, according to a joint report by the Commission and the Planning and Budget Organization.
“About 100% of the government’s resources have been realized in the budget of 2022, which is unprecedented and highly valuable in its kind,” Haji Babaei claimed.
However, contrary to the claims of Tehran’s officials, the International Monetary Fund (IMF) recently published a report indicating that Iran needed oil prices to be at $278 per barrel in the global market to prevent a budget deficit in 2022, which is three times the global oil prices from last year.
Cabinet officials of regime President Ebrahim Raisi have also claimed that there will be no budget deficit this year. The IMF, however, says that Iran needs to sell each barrel of oil at $352 to avoid a deficit.
This is while the price of Brent crude, which is even more expensive than Iranian oil, is currently around $75 per barrel. This is only a fifth of what the government’s general budget needs to avoid a budget deficit. Moreover, according to reputable media outlets such as Reuters, Iran provides a $11 discount to Chinese refineries for each barrel of its oil, in addition to the costs of evading sanctions and dealing with oil smugglers.
Furthermore, Mombeni said that the Iranian regime’s total debt to the banking system and organizations stands at around 11,440 trillion rials (approximately $32.68 billion), while the debt of state-owned companies is about 18,940 trillion rials (approximately $54.11). Additionally, the government owes about $74 billion to the National Development Fund.
The IMF also stated in its report on May 4 that Iran’s government debt reached around $100 billion in 2022, equivalent to 34 percent of the country’s gross domestic product (GDP), and it is expected to increase by about $12 billion this year.
Since the fall of 2018, the Central Bank of Iran has stopped publishing official reports on the details of the government’s budget realization.
Mehdi Ghazanfari, CEO of the National Development Fund, said on May 11 that approximately $100 billion of the fund’s $150 billion reserves has been withdrawn by various regime administrations, and around $40 billion has been paid out in loans.
Furthermore, Ghazanfari pointed out the challenge of recovering loans from the National Development Fund and explained that some oil and gas projects, despite reaching the production phase, are refusing their repayments to the Fund, and some power plants are also at a standstill. When a power plant sells energy at a low price, it cannot return the resources.
“While the average annual return rate of countries like Norway and Qatar is about six percent, the average return rate for [Iran’s] National Development Fund is zero, indicating that after ten years the Fund has become smaller. If the resource depletion continues, the Fund will be completely depleted,” Ghazanfari added.
The National Development Fund and the country’s banks are the main sources of government loans or assistance to compensate for budget deficits.
Iran’s government debt has increased by about 900 percent over the past decade. Simultaneously, the printing of unbacked bank notes, known as “hot money,” has also increased, resulting in inflation of over 60 percent in recent months.
Even if the government employs individuals and institutions to sell oil for them, resolving such a budget deficit, especially when the global oil price is lower than predicted, is not an easy task. Therefore, the only remaining solution is the old-fashioned method of borrowing from banks and the Central Bank, a short-term remedy that will render larger inflation figures.
On May 17, the “Eco Iran” website reported, citing an informed source in the Central Bank, said that the inflation rate for the month of Farvardin (March 21 to April 21) has reached 68.7 percent. This is only one step away from 70 percent inflation, the highest in the past 30 years.
Iran’s Central Bank has also stopped publishing inflation statistics since January. Unlike its previous policy, the regime’s Central Bank only publishes statistics on the rate of rise of prices of goods and services compared to the previous month, without providing any statistics on inflation each month compared to the same month of the previous year.
