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Journal of Chamber of Commerce;
Publication of the Chamber of Commerce,
Industries and Mines of the Islamic Republic of Iran
Nov. & Dec. 1997, No. 9
Summary: The total budget of the government for the year 1377 (begins on March 21, 1998) has been estimated at 233,699 billion rials. Of the total budget credits, 93,867 billion rials has been earmarked as the government's general budget. The budget of state-owned companies, profit-making institutes affiliated to the government and banks amounts to 153,691 billion rials.
The income envisaged in the general budget bill has been put at 84,666 billion rials while the current expenditure for the year 1377 has been estimated at 54,426 billion rials.
Cutting down on employment, preventing enlargement of the administrative system, relying on the principle of direct taxes, restricting the government's obligations with an eye to reduce the financial burden stemming from banking facilities, raising the ceiling of banking credits for the non-governmental sectors, shifting the financial burden of state-owned companies on the general budget to the domestic sources of those companies without increasing duties and tariffs, if possible, are among hallmarks of the next year's budget bill, submitted to the Parliament (Majlis) by President Mohammad Khatami.
Text:
The next year's budget bill was submitted to the Islamic Consultative Assembly (Majlis) by President Khatami on Sunday, November 30, 1997.
The budget bill would have been submitted on November 26, if the Majlis had not been closed. So, the government in its first legal duty towards the Majlis, acted timely, prompting the Majlis speaker to thank the government.
Growth
While submitting the budget bill for the next Iranian year to the Majlis, President Khatami presented a detailed report on the goals and structure of the 1377 budget bill.
In his report, the president praised the progress made during eight years of construction under presidency of Akbar Hashemi Rafsanjani.
He explained that during the said period, investments increased by 10 percent on the average annually, the rate of capital to the gross domestic product (GDP) rose from 12.4 percent in 1988 to 16.9 percent in 1996, the proportion of development expenses to the whole government expenses reached 34.7 percent from 19.4 percent and the gross domestic product grew from 5.9 percent on the average per year.
Bottlenecks
The president, however, summed up the economic bottlenecks of the country in the said eight year period. So, he tried to explain to the people what he had delivered and how he had delivered it.
The bottlenecks enumerated by President Khatami are as follows:
1- High rate of inflation in recent years (an average of 24.8 percent between 1989 and 1996).
2- High rate of unemployment among the active population (the president did not offer any figure in this regard).
3- Continuation of the relatively unequal distribution of incomes and the existence of an unacceptable gap between the incomes of families in group one and those in the last group.
4- Relatively low growth rate of GDP compared to that of other developing states
5- Sign of recession in some economic sectors
6- Low volume of investments by the private sector as compared to the GDP
7- Low volume of capital accumulation compared to the GDP (about 17 percent)
8- Expansion of government establishments especially those dealing with economic affairs
9- Acute imbalances in the trade without oil or in other words the low ratio of non-oil exports to imports
10- Heavy dependence of the government's financial structure on oil revenues
11- Low productivity of production factors and lack of optimal use of production capacities
12- Lack of a broad-based social security system bent on achieving social justice
13- Excessive concentrations in the country's executive affairs
14- Sophisticated administrative system with low efficiency and existence of parallel government organizations with similar duties
As it is evident, the president summed up only the major economic shortcomings while the budget covers all components and performance of government on a macro scale.
There were no words on the cultural, social, political and military affairs of the country, neither were the positive and negative points of the activities in the past eight years mentioned.
Axes
According to the president, in formulating the budget bill for the next Iranian year, the following points had a pivotal role:
a- Guidelines of the Leader of the Islamic Revolution Ayatollah Seyyed Ali Khamenei
b- The goals and priorities of the Second Development Plan
c- The policies announced by the government
As for the part b and c of these axes, it should be noted that the goals and priorities of the Second Development Plan are clear and approved.
Regarding the government's announced policies and strategies about which the president made some references to his election campaign programs, since none of these programs contradict the current laws and regulations in force in the country, their implementation will be all right.
However, for whatever programs whose implementation needs special credits or permission, necessary legal permits should be obtained.
In fact, 60 notes annexed to the first article of the budget bill for the next year, are aimed at supervising such cases and their approval by the Majlis means the legal endorsement of parts of President Khatami's election campaign programs.
General principles
In the president's report, written and arranged with great care and coherence, the general principles governing the formulation and compilation of the next year's budget has been summed up in 11 parts as follows:
1- Preparing the ground for structural reforms and access to a sustainable and balanced economic development
2- Providing the necessary conditions and ensuring more extensive activities by the non-governmental sector, increasing investment and production
3- Moving towards materialization of social justice, safeguarding the manpower, compensating for the expenses imposed on the low income strata of the society and campaign against the violent aspects of poverty
4- Assessing incomes and expenses on the basis of forecast performance in the current year
5- Financial discipline or in other words optimizing and economizing on government expenses
6- Strengthening the national currency and reducing dependency
7- Preventing the expansion of the administrative system and cutting down on expenses with emphasis on more productivity
8- Refraining from implementing new plans except in very urgent cases
9- Assessing incomes and expenses in a realistic manner
10- Providing more transparency in the budget figures and employing simpler methods for execution of the budget
11- Making the budgets of organizations operational as much as possible
Features
Based on the report presented by President Khatami, the next year's budget has some features that make it distinctive from this year's and previous budgets.
Some of these features are:
Efforts have been made to increase the share of non-governmental sectors (private and cooperative) in the banking facilities ceiling.
This policy will cause banking facilities to be allocated more to the economic activities with higher rate of return, something that will lead to improvement of the economy and create more employment opportunities for the population.
Efforts have also been made to gradually transfer the financial burden of state-owned companies on the budget to the domestic resources of government and non-governmental companies so that state-owned companies can increase their efficiency, decrease production costs, find financial sources other than the budget for their needed investments and finally become profitable by improving their management as well as production means. This will encourage people to buy the share of those companies.
According to the president, economizing on the current expenses is another hallmark of the next year's budget. Limiting employment, controlling the size of the staff at government establishments and preventing the expansion of the administrative system are among the points that will be given due attention.
More emphasis will be laid on direct taxes in order to administer justice in the taxation system.
Reducing the financial burden related to banking facilities by limiting the government's commitment to pay parts of the interest and commission relating to the loans granted to various sectors, is another feature of the 1377 budget.
Macro figures of the budget
The total budget of the country including the government's general budget and the budget of profit-making companies and institutes affiliated to the government and banks for the next Iranian year has been estimated at 233,699 billion rials (showing a 23.9 percent increase compared to the current year's budget).
Some 93,867 billion rials of the budget belongs to the government's general budget (indicating a 15.2 percent increase compared to this year's budget).
The budget of the state-owned companies and profit-making institutes affiliated to the government and banks (showing an increase of 29.5 billion rials) amounts to 153,691 billion rials, the breakdown of which is as follows:
The budget of government companies, 136,399 billion rials
The budget of profit-making institutes affiliated to the government, 3,266 billion rials.
The budget of banks, 14,026 billion rials.
The incomes envisaged in the general budget stand at 84,666 billion rials, showing a 29 percent increase over the predictable performance of the current year's budget.
Accordingly, the current expenditures of the 1377 budget have been estimated at 54,426 billion rials, registering an increase of 15.4 percent over the current year's budget.