Reduction of Several Thousand Billion in Development and Subsidy Budgets in the Proposed Budget for 2018

Hassan Rouhani presented Iran's budget for 2018 to the parliament. This budget comes with an increase of approximately 100 trillion tomans, while reports indicate that the share of the development budget for the coming year has decreased by 11 trillion tomans, and the predicted budget for subsidies has decreased by 19 trillion tomans. In the 2018 budget bill, about 60 trillion tomans are allocated for development projects. Last year, the government had predicted 62.7 trillion tomans for development projects, which the parliament increased to 71 trillion tomans. Thus, the development budget for the next year shows a decrease of 11 trillion tomans compared to the current year. According to ISNA news agency, "Based on the budget performance report for the first six months of 1396, out of the approved 71 trillion tomans, about 7.8 trillion tomans were paid. Although usually, payments for development projects are lower in the first half of the year and increase in the second half, there has almost never been complete realization regarding development payments." ISNA reported that previously, Mohammad Baqer Nobakht, head of the Planning and Budget Organization, had announced a payment of 110 trillion tomans for development projects in the coming year, which according to this news agency, seems that 50 trillion tomans in excess of the bill could be provided through banking facilities or foreign financing and also withdrawals from the National Development Fund. Nevertheless, the mentioned figure for the development budget is about 60 trillion tomans. Previously, Hossein Ali Haji Deligani, a member of the Parliament's Program, Budget, and Calculations Commission, had reported on December 7 about the reduction of the development budget in 2018. He stated that in this case, "definitely development projects will be stalled," adding, "The government must pay attention to the fact that reducing the development budget will lead to recession in the country." Meanwhile, the predicted budget in the government's bill for cash subsidies has decreased by 19 trillion tomans, which Tasnim news agency interpreted as meaning the "elimination of subsidies for more than 30 million people." Additionally, reports indicate that in the budget for the coming year, it is anticipated that the price of each cubic meter of water and each liter of diesel will increase by 20 percent. ISNA also reported on Saturday, December 9, that the increase in government employees' salaries in the coming year will be 10 percent. In this context, according to the state news agency IRNA, Hassan Rouhani on Sunday, December 10, while presenting the 1194 trillion toman budget for 2018 to the parliament, stated that the 2018 budget "is not just a list of income and expenses" and that all his promises to the people during the elections, including employment, economic growth, poverty alleviation, and reducing inequalities, are "well observed" in this bill. He added that "the goal is to have an annual growth rate of over five percent during the twelfth government." The President of Iran said, "We will define a standard for minimum living and announce that anyone in the country whose life and income is below this minimum can register in a support organization. In fact, we will start a broad social security system next year." He added, "The first feature of the 2018 budget is employment." Previously, Hassan Rouhani and his officials have spoken about economic achievements in recent years. Nevertheless, critics of the Iranian president, including some economists and labor activists, argue based on official statistics that class disparity in Iran has increased, and the gap between income and expenses for low-income families, including workers, has widened. In another part of his speech, he mentioned "transparency" and "decentralization" as other features of next year's budget. According to reports, the ceiling of the current year's budget in the government bill is set at 1194 trillion tomans, which has increased by about 100 trillion tomans compared to the current year's budget. In this bill, the government's current budget is about 429 trillion tomans, which compared to the 371 trillion tomans of this year's bill shows an increase of about 60 trillion tomans, or 8.9 percent. Reports indicate that the price of oil in the budget bill is projected at $55 per barrel, and the price of each dollar is estimated at 3500 tomans. Meanwhile, the Research Center of the Parliament had previously recommended a price of $49 for oil and 3630 tomans for the dollar in the 2018 budget. "25 percent of the country's monetary market is under the control of six fraudulent cooperatives," Hassan Rouhani mentioned in another part of his speech, adding that they "decided on profits whenever they wanted and disrupted the currency, gold, and real estate markets as they pleased." He emphasized that dealing with these financial institutions was very "difficult" and added that "everyone was pressuring us, and all organizations were writing us letters. Strange people were making requests." The Central Bank of Iran announced in Ordibehesht of this year that the share of "illegal" credit institutions from people's deposits had been reduced "from over 20 percent of the monetary market to less than 10 percent." The Research Center of the Parliament reported on June 8 of last year, without naming, that six "illegal" credit institutions had about 133 trillion tomans, or about six percent of the total assets of the banking system, both legal and illegal. A significant number of financial institutions in Iran have failed to meet their obligations to investors due to bankruptcy or embezzlement, and the victims have protested in various parts of Iran. In this context, according to Fars news agency and social networks, some of these groups gathered simultaneously with Hassan Rouhani's speech in front of the parliament. Meanwhile, Ahmad Tavakoli, a representative of the ninth parliament, threatened on December 7 to reveal the names of those who received loans from the bankrupt financial institution "Samen al-Hojaj," stating that most of these individuals are experienced judges, children of prominent clerics, and political figures. The Mehr Housing Plan was described as a "big mistake" by the Iranian president, who criticized the previous administration for turning deserts into housing while housing should be located in the middle of cities. He emphasized that the houses built under the Mehr Housing Plan were constructed with "borrowing from the Central Bank," which was a "big mistake because it raised the monetary base and created 45 percent inflation." While the Supreme Leader of the Islamic Republic had called for an end to the Mehr Housing Plan at the beginning of the eleventh government, government members have repeatedly criticized this plan. According to them, "many of the housing complexes of the Mehr Housing Plan lack water and sewage treatment systems" and were built in locations that "lack infrastructure facilities." Meanwhile, after the first images of the destruction of Mehr Housing buildings in the Kermanshah earthquake were released, Es'haq Jahangiri, the first vice president of Hassan Rouhani, also stated on November 13 that "most of the destroyed houses in the earthquake belonged to Mehr Housing buildings." Vahid Haqaniyan, the assistant for special follow-ups at Ayatollah Ali Khamenei's office, reacted by saying that the structures of Mehr Housing "are not problematic" and "may God curse the first political seed sown by the first vice president, Mr. Jahangiri, who announced that the houses of the Mehr Housing Plan were destroyed in the earthquake." He later defended his statements regarding Mehr Housing and stated without apologizing to Hassan Rouhani's first vice president that he had no intention of insulting or offending Es'haq Jahangiri. The budget is "line by line," Mr. Rouhani mentioned in another part of his speech, adding: "Two brothers in one department, then a cousin came and got four lines, and lines and lines were created, and it is unclear who these lines and funds are allocated to and who supervises them." He called for a reduction in budget lines and stated that "if the trend of previous years continues, hypothetically, if the twelfth government cannot manage the country, the next government will definitely not be able to manage the country and will be in a deadlock." Experts have previously warned about the "structural" problems of the budget system in Iran, stating that if these problems are not resolved, the management of the country will be "disrupted." The website "Eghtesad Gerdan" has written that in addition to the lack of clear "goals," the design and preparation of the budget make it "practically" impossible to assess the impacts and results of budget laws, and "members of parliament do not have sufficient competence to review the budget, and for this reason, arbitrary handling exacerbates the approval of an inappropriate budget for the country." Meanwhile, Adel Azar, head of the Court of Audit, stated on November 13 that "indiscipline, lack of transparency, and deviation from the goal" are among the "black holes" of Iran's budget. In this context, the comparison of tax revenues with the expenses of foundations and non-governmental public institutions shows a 2300 percent increase in the budget of the parliament from 2004 to 2017. Parliament members: The government should pay its debt to the Social Security Organization. Cash subsidies, another failed project? Why has the rial fallen again? 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