November 29, 2024
I ran plans to triple military spending in next year’s budget, President Pezeshkian’s spokeswoman announced October 29. Iran’s budget has been plagued with deficits for many years, and a tripling of defense spending would seem likely to sink the regime financially. Pezeshkian presented the “first part” of the budget to the Majlis October 22, 6-1/2 weeks before the legal deadline for submitting all of the budget.
No one explained why he was submitting the budget so early and only part of it. Spokeswoman Fatemeh Mohajerani said the government planned to boost revenues to cover the added defense spending mainly by raising taxes.
The government has been trying to raise tax revenue ever since US sanctions cut severely into oil revenues. But tax evasion remains extensive. Pezeshkian’s budget presentation showed that in the first four months of the current Persian year, the government collected only 74 percent of the taxes it had planned to collect in that time frame.
Neither Pezeshkian nor Mohajerani explained why the defense budget would be tripled overnight or how the government expected it would be able to spend such a huge increase efficiently. Pezeshkian’s budget presentation showed that oil remains the primary source of government revenues despite the revolution’s promises of almost a half century to develop other sources of income and just use oil revenues for development purposes.
The budget documents showed oil would fund 35 percent of the budget this coming year while borrowing from the National Development Fund (which is funded entirely by oil revenues) would pay another 9 percent of the state revenues. Other sources were: taxes 28 percent; bond sales 12 percent; customs duties 4 percent; sale of state assets (privatization) 3 percent. That totals 91 percent, leaving 9 percent unexplained!
The budget assumes oil exports averaging 1,851,000 barrels a day at an average price of $63 a barrel. The price of an OPEC barrel has been at $70 or above the last three years and is at $81 so far this year. But Iran must sell its oil at a considerable discount because of sanctions. Still, a price of $63 did not appear unreasonable.
