Iran Faces A Huge Budget Deficit It Tries To Conceal
A top Iranian budget official has revealed that President Ebrahim Raisi’s administration's faces a huge budget deficit this year, despite official assurances.
A top Iranian budget official has revealed that President Ebrahim Raisi’s administration's faces a huge budget deficit this year, despite official assurances.
Rahim Mombeini, the deputy head of Iran’s Planning and Budget Organization, whose boss was recently sacked by President Ebrahim Raisi, said Saturday that Iran’s budget deficit for the previous Iranian year –which ended on March 20 – was about 8,000 trillion rials (about $16 billion in today’s exchange rates).
The figure is twice as much as the budget deficit of previous years, despite claims by Raisi administration officials who kept reassuring the nation that the budget did not have a deficit.
According to Mombeini, the amount of the Iranian government debts has increased about 900-fold over the past decade to 30 quadrillion rials, or $60 billion. This would be as much as 850 million barrels, or two years’ worth of oil exports at normal market prices.
This amount of debt, which is equivalent to 31% of the GDP, includes government debts to banks, the Central Bank of Iran, pension and social security funds, public and private sector contractors, and bonds that have been issued in previous years.
This colossal debt prompts the government to force the Central Bank to print money, leading to further inflation, which in turn forces the government to borrow more money, leading to a vicious circle.
British-Iranian economist Mohammad Hashem Pesaran, a former professor at the Faculty of Economics at the University of Cambridge, has recently warned that the current unstoppable decline in the value of the national currency and haphazard policies of the government is very likely to trigger mass hyperinflation in Iran.
The former head of the Planning and Budget Organization Masoud Mirkazemi, who was replaced in March, had reacted to reports about a deficit of 4,000 trillion rials, claiming that that those who say there is such a deficit are "wrong" and that "we do not have a deficit at all". Mirkazemi claimed that 93 percent of the budget was fulfilled in the previous Iranian year that ended on March 20.
Iran’s currency rial has halved in value since early September and is now trading at more than 500,000 to the US dollar. This immediately translates into higher consumer prices, which have seen double digit annual increases since 2018 when the United States withdrew from the JCPOA nuclear deal and imposed sanctions.
Last week, a news website in Iran quoted a central bank source as saying that inflation in the first Iranian month of the year (March 21-April 20) rose by 68.7 compared to the same period last year.
If true, this would represent a nearly 20-percent jump compared to the inflation rate last reported by the government in early 2023. The Central Bank of Iran and the Statistical Center of Iran have not released figures on point-to-point inflation for the past two months, comparing prices to the same months in the past year.
The period in question coincides with persisting low exchange rates for the rial. One year ago, the rial was trading at around 300,000 to the dollar, while in early May it dropped to as low as 550,000.
Even though Iran has one of the world’s largest, and most untapped, sources of oil and gas, Iran would need oil priced at $351.7 a barrel to balance its budget next year, the International Monetary Fund (IMF) said in its latest report released late last month. The current price of Brent Crude, which is way higher than the OPEC basket, is about $70 per barrel. Add to this the handsome discount the regime has to give to buyers who risk US and international penalties to trade with heavily-sanctioned Iran.
Another Iranian website compared the Islamic Republic’s economic situation to that of the Roman empire just before its collapse. The alarming comparison with the Roman Empire is not too far-fetched, as Iran faces a more immediate danger of rebellion by ever-impoverished masses.
Although large-scale anti-regime protests in the fall of 2022 were driven by social and political oppression, but the current economic crisis was also making hopeless young people restive. Also, labor unrest began to rise in 2023, as workers’ real incomes declined.
The member of parliament’s national security, Shahryar Haidari, attributed the weakness to the Raisi administration's inefficiency.
"While government revenues increased under President Raisi's government, it did not manage the resources as efficiently as the previous government [of President Hassan Rouhani] that had succeeded in controlling inflation to some extent…," Haidari said.
However, he did not mention that the Rouhani administration had more access to the national foreign currency reserves although both governments are accused of wasting the national savings.
Recent statements by officials revealed successive governments spent $140 billion of Iran’s National Development Fund in 15 years, with the Rouhani administration in power for eight years.
On the other hand, the current government's "better financial status" is based on claims by its officials about rising oil exports, while economists, politicians and the media have reiterated every now and then that, the government has not been able to repatriate the hard currency for selling the oil at a price discount of 30 to 40 percent.
Haidari also praised the Rouhani administration for handling the negotiations over the revival of the 2015 nuclear deal more efficiently thanks to its capability and experience without undermining Iran's interests. Meanwhile he criticized the current government's diplomatic weakness.
The lawmaker argued that although not all of the country's problems are linked to sanctions and JCPOA nuclear talks, yet the situation could improve by 70 percent if the negotiations reach positive results.
In recent days, first, an adviser to Supreme Leader Khamenei, Ali Aghamohammadi, who is also a member of the Expediency Council admitted that the country's economic situation is far less than desirable and that as a result "at least 19.7 million Iranians are deprived of proper housing, employment, medical care, food and clothing."
Later, former Telecommunications Minister Mohammad Javad Azari Jahromi criticized the Raisi administration for failing to stand by its promises of mending social divides, halving the inflation rate and immediately solving problems with the country's investment market. He pointed out that Raisi has lost a lot of his over two million followers on Instagram.
On Saturday, hardline daily Kayhan, whose editor is appointed by Supreme Leader Ali Khamenei and usually fully and unjustifiably defends the Raisi administration, shyly but openly criticized exiting economic conditions and wrote: "The people's economic situation has not improved under the new government. The cost of housing has continuously grown, and the price of essential commodities have increased, putting the people under pressure."
The Kayhan reiterated that "prices in the market in Iran reflect a chaotic situation." The daily added that the Islamic Republic cannot tolerate rising popular dissatisfaction. The economic problems of low-income Iranians is part of the country's realities, and the Islamic Republic and the ideology of late Ayatollah Ruhollah Khomeini and Supreme Leader Khamenei call for improving the economic situation in the interest of low-income Iranians." However, the daily stopped short of suggesting how this can be done.
The hardliner daily, as many other media outlets and public figures in Iran, steered away from pointing to US sanctions as the main reason for the economic crisis, and the need for an agreement with Washington.