Iran General NewsIran's Ahmadinejad submits $89bln budget

Iran’s Ahmadinejad submits $89bln budget

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ImageAFP: Iranian President Mahmoud Ahmadinejad on Tuesday submitted to parliament an 89-billion-dollar government budget for the year to March 2010 in the face of low oil prices and high domestic inflation.

ImageTEHRAN, Iran (AFP) — Iranian President Mahmoud Ahmadinejad on Tuesday submitted to parliament an 89-billion-dollar government budget for the year to March 2010 in the face of low oil prices and high domestic inflation.

The budget detailing government spending plans is based on a global oil price of 37.5 dollars a barrel, sharply lower than the peak of nearly 147 dollars seen in the middle of last year.

OPEC-member Iran, the world's fourth largest producer of crude, depends heavily on oil revenue for government spending but Ahmadinejad — who is facing a presidential election in five months — has come under heavy fire over his expanionist economic policies.

"Considering today's global economy, we sought to plan a budget with less government dependence on oil resources and if there is a rise in energy prices next year, the extra income from oil sales will be invested in infrastructure and construction projects," the official news agency IRNA quoted Ahmadinejad as saying.

Parliament will debate the budget on February 28, the agency added.

Iran's leading economic daily Sarmayeh put the overall budget for the Iranian year 1388 at 250 billion dollars, including 150 billion dollars from state-owned firms, saying it was around 14 percent lower than the current year.

Last year Ahmadinejad had proposed an overall budget of 285 billion dollars for the year to March 2009, but his latest fiscal proposal contains only the government's spending plans.

IRNA said the new budget projects 37 billion dollars in oil revenue, adding that Tehran plans to withdraw 14 billion dollars from the country's Oil Stabilisation Fund which is used to support macro energy projects and prop up private sector projects.

Former economy minister Davood Danesh Jafari said the year ahead was expected to be "difficult" because of the expected fall in oil income.

On Tuesday, Brent North Sea crude for delivery in March was trading at 47.39 dollars a barrel, while New York's main futures contract, light sweet crude for March, was at 46.16 dollars.

"Some part of the projected income is unrealistic and some budgetary figures are contradictory," said Jafari who was sacked by Ahmadinejad in April reportedly for criticising his handling of the economy.

Jafari and former central bank chief Tahmasb Mazaheri who also was sacked by Ahmadinejad, had been severely critical of the president with the latter favouring easing of bank rates and strict control on loans to curb inflation.

After leaving office, Jafari criticised the lack of economic expertise behind the government's plans and said he opposed many of Ahmadinejad's economic policies despite serving almost three years in his government.

Economists too have criticised the hardline leader for his extravagant withdrawals from the Oil Stabilisation Fund for construction projects amid concerns over the falling oil price that could lead to a deficit in the budget.

Iran, where an estimated 80 percent of the economy is controlled by the state, is reeling under massive inflation which peaked at 29 percent in late September 2008.

On Sunday, central bank chief Mahmoud Bahami attempted to paint an improved picture, saying inflation would be cut to around 22 percent by the end of the year to March.

"Given that plans were made to increase production and to supply goods proportionate to demand, the central bank believes inflation will return to 22 to 23 percent by the end of the year," he told Sarmayeh.

Central bank officials have cited growth in money supply as the prime factor for the surge in inflation, but they have also partly blamed it on increased global prices.

Analysts say the government has already injected so much oil money into the economy that inflation will remain high for months and years to come, despite central bank efforts to reduce the excessive volume of loans.

To curb inflationary pressure, Minister of Commerce Masoud Mir-Kazemi has ordered importers and manufacturers to slash prices and threatened to penalise businesses which fail to comply.

Crude income accounts for 80 percent of Iran's foreign earnings, making the government-run economy highly vulnerable to oil price shifts.

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