Iran president presents budget for 2009-10

by Edmund Blair, Hashem Kalantari and Parisa Hafezi

Iran's president presented his 2009-10 budget to parliament on Tuesday that he said was based on sliding oil prices and which analysts called contractionary because it will grow far slower than inflation.

Mahmoud Ahmadinejad did not give figures but an official earlier said the budget was worth 890 trillion rials ($92 billion), just three percent bigger than the budget approved for 2008-09, while inflation in the past year was over 25 percent. "That means the government has adopted the policy of tightening its belt for next year," a pro-reform newspaper, that is often critical of the president, wrote under a headline that referred to a "contractionary" budget.

One economist said it was "unfeasible" for the government to meet its spending needs with such a budget, and said the bill could be challenged by parliament, which must approve it. Another analyst said the overall figure indicated capital spending would be chopped, which will not help Ahmadinejad before a June vote when he is expected to seek re-election.
Ahmadinejad, who came to power in 2005 vowing to share out Iran's oil wealth more fairly, has lavished spending on rural and other poor areas. Many public projects may now be halted. But the outcome of the election may largely depend on whether the president retains the support of Supreme Leader Ayatollah Ali Khamenei, Iran's highest authority who has praised the president and whose views influence millions of loyalists.

"The budget bill for 1388 (the Iranian year starting in March 2009) has been drawn up by taking into account the drop in oil income," Ahmadinejad told parliament in his address broadcast on state radio. Oil surged to $147 a barrel in July but has tumbled to trade at $47 on Tuesday. The budget is based on a price of $37.50.

Any earnings above the budget price should go to a reserve fund meant to be saved for tougher times like now. But the government, even in oil windfall years like 2008-09, has often tapped those reserves to support budget spending.

Poul newspaper said the budget projected an increase of 54 percent in tax revenues, which in 2008-09 were targeted at 217 trillion rials. It also said this new budget eliminated any allocation for the import of gasoline and diesel fuel.

Iran, the world's fourth largest oil exporter, cannot refine enough gasoline and diesel for domestic needs and has to rely on expensive imports, which it has heavily subsidised. A reform bill proposed by Ahmadinejad aims to hike fuel prices, which an official said could save 85 trillion rials.

But the bill has yet to be passed and has been criticised by some lawmakers who fear it will stoke inflation. Saeed Laylaz, editor of the economic daily Sarmayeh, also questioned whether tax income could rise as swiftly as planned.

A senior government official said development or capital spending was 222 trillion rials in the 2009-10 budget bill, but could be increased if oil prices rose in the year, media said. Central bank figures showed the budget approved for 2008-09 was worth 864 trillion rials and included current spending of 583 trillion rials and capital spending of 245 trillion rials.

But parliament reallocated about 50 trillion rials in the year from capital spending to meet surging current needs. ($1=9.680 rials)

Source : Reuters