President Hassan Rouhani presents the Government’s budget to Parliament, December 10, 2017


Iran’s Supreme Leader may have held up the Rouhani Government’s budget for 2019-20, amid economic problems and US sanctions.

The Government tabled its draft budget on December 6, with MPs scheduled to debate the proposal on Sunday. It provides for a nominal 12% increase in spending, with the aspiration to reduce dependence on oil exports to 27% of revenues.

But on Tuesday, Mohammad Baqer Nobakht, the head of the Planning and Budget Organization, did not give final figures when he spoke about the budget to reporters.

On the same day, after a meeting between President Hassan Rouhani and the heads of the legislative and judiciary branches, judiciary head Sadeq Larijani said they discussed “how to implement Ayatollah Khamenei’s views about the budget”, pointing to the Supreme Leader’s intervention.

Rouhani said afterward that the bill should be “probably amended”.

Cabinet Secretary Mohsen Haji Mirzai told reporters that the Cabinet may have to hold several meetings to discuss the implementation of Khamenei’s views.

Khamenei reportedly wants money from the National Development Fund to go to the military rather than to government operations or to the building up of the reserve.

MP Mohammad Hosseini said Thursday, “A percentage of the foreign currency reserve fund should have been allocated to defense, but it has not been. We shall try to address that shortcoming in the Majlis.”

The Government’s budget is nominally 4.33 quadrillion rials, a 12% increase over 2018-19. But a higher exchange rate against the dollar could mean that spending is far less in those terms: $75 billion v. $104 billion in the current budget.

Revenues are based on 1 to 1.5 million barrels per day of oil sale, compared to 2.5 million bpd this year, at $54 per barrel.

Amid the threat and then implementation of US sanctions from November 5, Iran’s oil exports have dropped from 2.5 million bpd in April to 1.1 million in November.

The Government is also struggling with long-standing internal problems that have affected productivity, employment, investment, and the environment. The rial lost 75% of its value to fall to a historic low of 190,000:1 vs. the US dollar, but has recovered through Government intervention to about 107,000:1.