That is 5.1 quadrillion rials, worth about $416 billion at the current official rate of exchange, but $300 billion at the open market exchange rate.
The most remarkable budget change was mentioned only in passing and deep into his speech; Ahmadi-nejad is proposing to increase the military budget by 127 percent. He announced that figure, but never explained to the Majlis why he felt a need to more than double military spending, a rate of increase unheard of except in wartime.
“In the area of defense, there is 127 percent increase,” he said. And that was all he said on that topic.
The budget is divided into two parts—1.1 quadrillion rials for the government and 4 quadrillion for state-owned companies.
The president said the number of state-owned firms, now 440, would be cut only to 434, suggesting that the much-touted privatization program is grinding to a halt.
Ahmadi-nejad said the government’s portion of the budget was being cut 5.6 percent compared to the current year. But he didn’t say what was being cut. In fact, he announced many huge increases. Beyond the 127 percent boost in defense spending, he said culture would see an 88 percent hike, health care 53 percent, housing 32 percent, agriculture 30 percent, energy 26 percent, construction 23 percent, water 19 percent and transport 15 percent. That suggested huge cuts in some other areas, but Ahmadi-nejad did not mention any state programs being reduced.
Ahmadi-nejad said the government was moving to reduce its dependence on oil revenues by proposing tax hikes. Presidents since Ali-Akbar Hashemi-Rafsanjani—going back 23 years—have all said the same thing. Yet the government remains dependent on oil sales for more than half its revenues. Ahmadi-nejad said his budget assumes tax revenues increasing by 20 percent this coming year. Of course, with inflation currently running at more than 20 percent, that doesn’t mean very much.
Ahmadi-nejad did not say what average oil price was used in calculating revenues, but other officials said the budget assumes $85 a barrel. That is not an unreasonable figure considering that the OPEC barrel price is currently around $110 and was last below $85 in November 2010.
Ahmadi-nejad projected that with his budget the Iranian economy would grow by 8 percent this coming Persian year, starting March 20. The World Bank projects growth in Iran of 3.0 percent for 2012. Ahmadi-nejad was pretty much obligated to predict 8 percent growth since the current five-year plan calls for 8 percent growth each year of the plan. But that figure is a wannabe growth rate, not a realistic projection.
In his speech, Ahmadi-nejad boasted that the Tehran Stock Exchange “has been among the most successful stock markets in the world” and “is a symbol of this country’s economic vitality.” Indeed, in the last 12 months the Stock Exchange index has risen 18.8 percent—but that is still less than the inflation rate of above 20 percent.
Ahmadi-nejad said, “In terms of economic and evolution indices, we have passed a good year, while the conditions of the world and our region have been moving in the opposite direction.” Actually, that reversed the truth. The World Bank shows Iran with zero growth in 2011, while all the other major regional states showed growth; even Egypt, disrupted by its revolution, was reported to have had 1.0 percent growth in 2011.
The deadline for the submission of the budget was December 6. But Ahmadi-nejad did not apologize for submitting his budget late—as he has every year of his presidency.
It is assumed he feels this will give the Majlis less time in which to poke into all the nooks and crannies of his budget before it must be enacted in advance of Now Ruz. A few weeks, the Majlis said it would just approve a two-month budget before Now Ruz and then would have until late May to review and approve the rest of the budget.
Ahmadi-nejad has normally been from one to two months late in submitting the budget each year. The best he has done has been to deliver the budget 32 days late four years ago. Three years ago, he set a record when he was 53 days late. Then last year, he was 76 days late and set a new record, delivering the budget February 20 and allowing the Majlis only four weeks instead of 15 in which to review his draft. This year, Ahmadi-nejad seemed to have improved, delivering the budget 57 days late. But considering that the Majlis adjourned Tuesday—six days after the budget was delivered—until after the March 2 elections, he actually left the deputies less time than ever before.
The Majlis solution—approving only a partial budget—looks much like what the US Congress does when it gets tied in knots and passes a “continuing resolution” allowing government agencies to spend at the same rate as in the previous year until the Congress sorts things out. But the problem in Washington is legislative delays; the president submits the budget in January, more than eight months before the new fiscal year begins October 1.