Iran’s president has offered to rewrite his proposed 1405 budget after parliament rejected the draft, opening talks with lawmakers on pay rises, taxes and subsidies, the parliament speaker said.
Parliament Speaker Mohammad Bagher Ghalibaf said on Tuesday that President Masoud Pezeshkian’s letter to parliament seeking talks with lawmakers over changes to the government’s proposed 1405 budget amounts to a withdrawal and revision of the bill and the submission of a new budget plan.
Ghalibaf’s comments came after parliament’s presiding board read out a letter from Pezeshkian addressed to the speaker, in which the president said his government was ready to engage with lawmakers and the powerful joint budget committee to amend the draft budget while observing inflation constraints and the overall spending ceiling.
In the letter, Pezeshkian said the government was open to revising the bill to raise salaries and benefits for state employees and pensioners, adjust effective tax rates to ease pressure on businesses, recalibrate tax exemptions to favor lower-income earners, modify planned value-added tax increases so proceeds fund food voucher schemes, and pursue broader changes aimed at expanding subsidies to support household livelihoods.
The move follows Monday’s decision by the joint parliamentary committee to reject the budget’s general framework by a wide margin, citing concerns over inflationary pressures, falling purchasing power and doubts over the government’s revenue projections.
Parliament’s budget committee said it rejected the bill chiefly because the government’s proposed 20% pay raise for state employees and pensioners would lag inflation and cut real purchasing power, with lawmakers warning of a further squeeze on household living standards.
The committee also flagged the inflationary impact of the government’s plan to raise value-added tax by two percentage points (to 12%), saying it was unclear how the resulting price pressures would be offset for lower-income groups, including via promised subsidies such as food vouchers.
In addition, lawmakers cited ambiguities over revenue assumptions, including the transparency and reliability of oil income and foreign-currency inflows, as well as uncertainties around how subsidized exchange-rate allocations and other subsidies – such as bread support – would reach end consumers rather than being lost to inefficiency or rent-seeking.
The Majlis’ joint budget committee voted 32–9 against the bill’s general outlines on Monday, citing concerns that the proposal would fuel inflation, further erode household purchasing power and rely on revenue assumptions lawmakers fear will not be met.
The committee said its report rejecting the bill will now be sent to parliament’s leadership for debate in an open session, where lawmakers will decide whether to return the budget to the government for revision.
The budget had been formally submitted to parliament last week, as Iran grapples with mounting fiscal pressures, a sliding rial and rising public discontent over living costs.
