A total budget, including state enterprises, of about USD 328B for the next Iranian fiscal year has been proposed. Both the IMF and the draft government budget show spending and revenues in balance, indicating macroeconomic stability.The budget is based on an average oil price of USD 55 pb, up from USD 40 pb in the current year’s budget, for the FY2017/18 Iranian year (starting on 21 March).
The FY2017/18 budget is based on a GDP growth assumption of 7.7% (5% in FY2016/17), and an inflation projection of 7.6% (compared to 11% in 2015/16).
The prime focus of the budget is on unemployment, water resources, railways and the environment.Iran’s water shortage sees 7 of the country’s 32 provinces experiencing water shortage while 13 face a critical water situation. Last year, nearly 3,000 water and wastewater projects nationwide were incomplete due to funding constraints. One percent of oil and gas revenues (about USD 29B) have been allocated for railway development projects.
The contribution of oil revenue in the current year’s budget is USD 22.8B, indicating more than 50% increase in the projected oil revenue for 2017/18. Oil accounts for 34.6% of revenues in the proposed budget, up from 25.8% at present. This shows that next year’s budget is even more dependent on oil compared to the current year from the budgetary angle.
Revenue from the transfer of financial assets amounts to USD 12.87B. Seventy-seven percent of this comes from the government’s plans to issue Islamic bonds worth USD 9.8B.
Wages and salaries are the largest component of current expenditure, amounting to 28.7B (40% of total current expenditure and 22% higher than this year’s budget).
Spending on social security, the 2nd largest component of current expenditure, is budgeted at USD 22.1B, or 31% of total current expenditure.
The government is planning to spend USD 14.5B to pay the monthly cash handouts (Yaraneh), which have largely replaced subsidies on energy and food as part of the 2010 Subsidy Reform Plan.
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