Iran’s Budget Bill Delayed, As Currency Continues To Fall

While the Islamic Republic’s currency rial is in a freefall, President Ebrahim Raisi’s government has not finalized the country's budget for the next Iranian year starting March 21.

The delay by the government, which should have submitted the budget bill by December 6 according to the regulations, is reminiscent of the administration of Mahmoud Ahmadinejad who postponed the budget bill until a few months into the year. This means that government departments and organizations were disoriented for a couple of months before they understood how they had to plan their spending.

According to parliament rules, if the administration misses the December 6 deadline, it must attach an addendum to the budget bill that will earmark the spendings for quarterly portions of the year. This means demanding extra work from an administration that has already failed to perform its ordinary procedural duty.

Quarterly allocations means parliament will approve only three-month budgets, which will tremendously complicate operations not just for government departments but all the businesses owned or controlled by the state, which constitute up to 80 percent of the economy.

Many economic experts are of the opinion that the delay by the administration means economic chaos for at least the first few months of the next Iranian year. Meanwhile, many lawmakers believe that the administration is deferring the decision until the very last minute so that the MPs do not have enough time to fiddle with the figures and are forced to pass the bill as is.

Parliament approved the broad outline of the current budget in January with a significant number voting against the bill that raised taxes and cut subsidies.

Another reason that may be behind the delay in submitting the budget bill is timing for the country’s Seventh Five-year National Development Plan (2022-2026). Since 1989, the Islamic Republic has been devising five-year development plans for the country. A lot of organizations and institutions are involved in designing and actualizing these plans, which mostly remain on paper, because of they are full of general statements without planning for the needed monetary resources.

For example, “The country should see a rise in the speed of scientific and technological progress and commercialization of their products, while the educational and research systems need to be updated and upgraded over the target period,” reads part of the Seventh Five-year National Development Plan.

In September, the Supreme Leader outlined the general policies of the seventh development plan and Raisi tasked the Planning and Budget Organization (PBO) to officially start its compilation.

According to the general policies, the 7th development plan’s main goal and priority is economic progress with an average rate of eight percent during the five-year period, with an emphasis on boosting productivity, capital, technology and management. Reforming the structure of the government budget was also among the major policies stressed in the Seventh National Development Plan. The economic policies also call for transformation in the tax system with a view to making levies the primary source of the government’s current budget.

Amid ongoing antigovernment protests, the Islamic Republic’s currency rial has been losing value so much that regime insiders have started passing the buck. Iran’s currency dropped to a new historic low on Tuesday, breaking the 421,000 rial resistance point against the US dollar.