Head of the Court of Audit: Lack of Transparency is Iran's Budget Black Hole

The head of the Court of Audit states that unlike Iran, nowhere in the world is the level of government debt "classified". The country's budget balance in 2016 reached a negative 61 thousand, and "indiscipline and lack of transparency" are the "black holes" of Iran's budget. According to Tasnim News Agency, Adel Azar announced this in a public session of the Islamic Consultative Assembly on November 13, identifying "operational balance" as one of the "key indicators" of the budget. He said: "In 2011, this balance was 28 thousand, and in 2016, it was 61 thousand negative, indicating that we must sell national assets and resources, such as oil and companies, to secure the necessary funds." Meanwhile, Mohammad Baqer Nobakht, head of the Planning and Budget Organization, previously announced on September 25 that Iran's oil revenues during the eleventh government were 157 billion dollars, noting that oil prices fell from 104 dollars per barrel in 2013 to 44 dollars in 2016, resulting in a 37 percent decrease in oil revenues during this period. Fereydoun Khavand, an economist based in Paris, told Radio Farda about the operational balance of the budget: "Iran's annual budget is based on three operational balances; operational balance, capital balance, and financial balance. The operational balance refers to the difference between revenues and budget expenditures without considering oil revenues." He pointed out that these revenues are mainly sourced from taxes, adding: "In the operational balance, expenses are in the form of government employee salaries and current government expenses." Khavand mentioned that if the deficit in the operational balance is not compensated, the government resorts to using oil revenues, borrowing, issuing bonds, and turning to banks. Previously, the newspaper Shargh reported on October 15 that "five months into the year, the government has exhausted its entire budget and, moreover, has incurred a deficit of about 47 trillion tomans; a deficit that has surpassed that of two years ago and showcases the growth of the deficit." According to Shargh, "This performance indicates a recurring mismatch between income and expenses, which has been warned about repeatedly, and no effective solution has been proposed to address this issue, while the government continues to increase its debts." In this context, Hadi Haqshenas, an economist, emphasized that "the figure of 47 trillion tomans is significant in securing the country's public budget," telling Shargh that "the government’s budget deficit, just five months into the year, stems from the failure to realize oil revenues, failure to realize tax revenues, and failure to sell companies and treasury bonds." According to Tasnim, Adel Azar further stated: "Our capital assets are financed through the sale of participation bonds, and when the maturity of the bonds comes due, the principal and interest are paid back with new bonds, and no cash is paid for it." The head of Iran's Court of Audit criticized lawmakers for approving the government's budget requests "without careful consideration and analysis." He addressed the representatives, saying: "In the 2017 budget, you allowed five trillion tomans in securities with a five-year maturity to be paid for the repayment of the principal and interest of matured bonds." Azar added that representatives also allowed "three billion dollars in currency bonds to be paid to the Ministry of Oil for the repayment of principal and interest on matured bonds, which is selling the future." According to this official, "indiscipline, lack of transparency, and deviation from objectives" are evident in Iran's budget, which are the "black holes" of the budget. Fereydoun Khavand, commenting on this aspect of the head of the Court of Audit’s statements, emphasized that there is no financial transparency in Iran, stating: "No one really knows the status of financial statements, contracts, and reports related to the performance of executive bodies, municipalities, and public institutions. Therefore, oversight of the budget is very difficult." This economist noted that the administrative apparatus in Iran is very extensive, adding that the government, especially during Mahmoud Ahmadinejad's presidency, has become "overgrown." Furthermore, in Iran, energy carriers are still very cheap compared to their real prices and are considered a burden on the government budget. At the same time, construction projects are not executed properly, and even after project completion, they are not economically viable. According to Tasnim, Adel Azar also stated that this aimlessness is such that "miscellaneous appropriations account for 39 percent of the public budget, and these appropriations are repeated every year without a specific goal." He also criticized that the budgets allocated to provinces are not spent by them, adding: "In 2011, we spent six times the allocated budget in one province. In 2015, we spent eight times the allocated budget in another province, but only one-eighth of that money was spent by the provinces themselves." The head of the Court of Audit referred to "dedicated revenues" as one of the "serious corruptions of the budget" in Iran, calling it "one of the centers of unconventional payments." He stated that in Iran's budget law, "we have 27 construction projects that are over 41 years old, and we have 755 construction projects for which no final year is mentioned." The head of the Court of Audit criticized what he called "squandering of the budget allocated for construction matters," adding that "out of every 100 tomans spent on construction in the country, 52 tomans convert to output, while 48 tomans are squandered." Azar considered this phenomenon a sign of "inefficiency" and added that "if there is precise planning for the budget, the output of the money spent on construction works will improve. In advanced countries, this output is 97 tomans." This official also stated that one of the "troubles" with the government is the "classified" nature of government debts, adding: "When we ask the government how much these debts are, they declare it is classified. Nowhere in the world are these debts classified, and they are announced on a specific website." The head of the Court of Audit discussed ways to resolve these issues, stating that one solution is the "performance attachment of the budget execution system" by the government when presenting the budget program to the parliament. Adel Azar added that this would enable the Court of Audit to "audit the government’s performance" and see how much of the promises and requests have been operationalized. He further called for "consensus" between the government and parliament to achieve this, stating that this "accountability model will increase transparency." Previously, experts have repeatedly criticized the "structural" problems of the budget system in Iran and warned that if these problems are not resolved, the governance of the country will be "disrupted." The website "Eghtesad Gardan" has written that in addition to the unclear "goals" of designing and preparing the budget, which effectively makes examining the effects and results of budget laws "impossible," "members of parliament also lack the necessary qualifications to review the budget, and for this reason, arbitrary handling exacerbates the approval of an inappropriate budget for the country."