Iran Economy NewsThe Vicious Circle of Budget Structure Reforms in Iran

The Vicious Circle of Budget Structure Reforms in Iran


Iran’s state-run outlets acknowledge that one of the ongoing disputes in the media is about the budget structure and its reforms. Bijan Abdi one of the governmental economists criticizing the present situation said:

“What was done in the government and the management and planning organization to reform and clarify the budget was a series of words that were of no use to anyone. Words that one thinks are mostly sham, and by presenting forty, fifty pages, they got rid of with useless words.

“The serious problems we had in the budgets of the last two years in the last two governments were that in practice the government did not believe in planning and did not do the rights things, what the parliament approved, while the deviation of the government from the approved budgets and programs is so great, that the lack of a plan for the government does not make much difference,” Radar-e-Eghtesadi website wrote on November 23.

The poor economic situation which of course is intensified by Iran’s global isolation and sanctions, but has other main reasons which are raised from the heart of Iran’s devastated economy, which is caused by the government’s corrupt policies, and has nothing to do with the sanctions and the government’s external conflicts.

Even government experts see sanctions as a secondary issue that has a dual effect when it comes to a corrupt and undisciplined economy like Iran’s.

“Reference to this budget document and review of its various clauses clearly shows that from beginning to end it is full of small and big problems, each of which is the source of one of the most important problems in the economy and of course people’s daily lives. In a way, it is sometimes surprising why these issues exist in the country’s budget but have not been corrected over the years,” Farhikhtegan website wrote on October 15.

Of all the debates over reforming the budget of the Hassan Rouhani government, it is enough to mention the issue of state-owned companies, which account for about two-thirds to 75 percent of the total budget for 2020. This is a number equal to three times the country’s general budget.

A Look at Iran’s 2020-2021 Budget

It may be hard to believe that no one in this country knows how the budget lines and details of the allocations and audits of state-owned companies are done and where the documents are. How much did the members of the Parliament examine these documents and carefully evaluate their figures? How much tax do state-owned companies pay?

“All three of these questions can be answered with a well-known and now termed phrase in the country, ‘almost none’, you may ask what does this phrase mean?

“We say this means that the least transparency, the least oversight, and the lowest tax payments are for the largest part of the budget. The referral to the MPs was followed by only one answer, ‘Basically, the MPs do not have the opportunity to review these sections! If you hear it, you must be surprised, ‘The share of collections that account for 75 percent of the country’s budget is only 3.5 percent of the tax paid,” Farhikhtegan added.

Hiding the Budget Deficit

Whether in the case of state-owned companies or in other cases, the first principle for correcting anything is transparency and revealing all the underlying facts and details.

The first step in reforming the budget structure is that the government does not hide its budget deficit. Haji Babaei, head of the parliament’s program and budget commission, said:

“In order to reform the budget structure, resources and expenditures must be transparent, and everyone who receives money from the budget must have an ID.”

Meysam Pilehforoush, a government economist, also said: “The specification of the non-oil budget deficit is a summary of all the research institutes that have never been heard before.

“Interestingly, some of those currently in charge taught these things at the university themselves, but when asked why they do not do what they taught in the classroom, they say that these reforms have not been done yet and why should we bother? The future generation will be working hard for fundamental reforms!” Mehr News Agency reported on  November 22, 2020.

It has been said many times that, ironically, sanctions and the isolation of Iran from the international system are a favorable situation for realizing the slogan of independence and self-sufficiency.

But even the speakers of these slogans do not believe these words. The state-run media also says about these slogans and their speakers:

“The country’s budget is oil-based and has had major structural problems in recent years, but governments have refrained from reforming it to provide easy revenue from crude oil sales.

“In recent years, especially in 2019 and 2020, when oil revenues declined, policymakers were expected to inevitably move towards structural budget reforms, but unfortunately, each year, the government presented the parliament with excuses, formal and unbalanced budgets, and passed a resolution with unsustainable revenue sources. And harm the economy.

“But the interesting thing is that Mohammad Baqer Nobakht, the head of the Program and Budget Organization, not only believes that dependence on oil has been eliminated and this year’s budget bill was submitted to the parliament with structural reforms (of last year), but instead of accepting the mistakes and shortcomings of the government in this regard, he throws the ball in the parliament court and believes that the reform of the structure should start from the parliament,” Mehr reported on November 15.

The futility and emptiness of the slogan of budget reform have been proven one by one during the decades. To the extent that government experts and policymakers have acknowledged this.

Budget Settlement Reveals Systematic Corruption in Iran

Hadi Sobhanian, Deputy Director of Economic Research at the Research Center of the Parliament, said that we are stuck in a vicious circle of structural reforms:

“A serious critique of the policy-making and implementation system in the country is ‘losing opportunities.’ When the policymaking system does not work in time, it is empty-handed when it needs to be ready.

“Given the dependence of government revenues on oil when the situation is normal, governments have no will or determination to move towards structural reforms. They make a living with the same oil money and do not reform the existing structures because the beneficiaries of the status quo resist the reforms.

“When we move to emergencies such as sanctions or events such as oil price hikes or the outbreak of the coronavirus, the reform options that were normally on the government’s table are removed from the table, arguing that the country is in a special situation. This approach has left the country in a vicious circle of structural reform,” Mehr reported on April 21.

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