Budget Crisis 2020

Iran in 2020: Budget or Budget Crisis?

Budget Crisis 2020

MEK Iran: Since March, the coronavirus has paralyzed much of the country’s economy.

The budget of the mullahs’ regime in 1399 (March 21, 2020-March21,2021) has become an undeclared crisis for the regime.

Basis of calculations

In November 1999, the government submitted its budget to the Majles or parliament. The expenses of the country were about 480 thousand billion tomans. When the budget was presented, the deficit was calculated at around 150,000 billion tomans, which is equivalent to one-third of it. But other calamities were imminent.

According to the government, the export of one million BPD of oil per barrel of $ 50 was assumed, which was about 50,000 billion tomans. Taxes were another income of the government, and 195 thousand billion tomans were allocated to tax collection in the budget.

Devaluation of oil to about $ 15 a barrel, and the tightening of sanctions, effectively put those 50,000 billion tomans at an unknown fate.

Since March, the coronavirus has paralyzed much of the country’s economy.

Omid Ali Parsa, head of the country’s tax authority, said that if businesses return to pre-March levels from June 1, the financial losses reducing tax revenues for March, April, and May will be more than 50,000 billion tomans. In other words, the reduction of oil revenues and coronavirus consequences have reduced the government’s revenues by one hundred thousand billion tomans so far. Even before these incidents, we had a budget deficit of 150,000 billion. Thus, also if nothing else happens, the government is still facing a budget deficit of 250,000 billion tomans.

To this number, we should add a loan of 17,000 billion tomans for one million toman aid to citizens, in addition to the livelihood packages that were distributed to face the coronavirus. Assuming that there are no other payments, the government does not have more than half of that 480,000 billion tomans to run the country this year.

False and deceptive calculations

Morad Rahdari, an economist and member of the faculty of Payame Noor University, told the Democracy newspaper that the way statistics are displayed in the budget calculations of this year by the authorities is wrong and deceptive.

“The government says we have 25 million people employed in the country, over the active population, estimated at 28 million, so they say we have three million unemployed and 10 percent to 11 percent unemployment rate,” he said. These figures are calculated for the 83 million population of Iran beginning from the age of ten! But this population makes much more than twenty-eight million workers, and this is unrealistic! Even if you say fifteen years or more instead of ten years, and then consider the maximum working age to be 65, not higher than what they claim, our minimum expectation should be to look at about fifty million people ready to work. “If we have 25 million people at work, then we should have the same 25 million people unemployed and deprived of business and income opportunities.”

Regarding the country’s foreign exchange reserves, he says: “A year ago we had about $ 180 billion in reserves, and now there are about $ 80 billion left of it! And it may not be readily available.  Because we thought we would export one and a half million barrels of oil in 1998, but in practice, less than 200,000 barrels of oil were exported, so we had to withdraw from this account! In the 1399 budget, we will inevitably have to withdraw, so what should be done in 1400 if the balance of this foreign exchange reserve account and our support reaches zero? Currency reserve is our reassurance, and if we cannot provide foreign exchange to the country’s economy for a while and can’t manage the country’s situation by relying on the same account, aren’t we putting it at risk?!

What is taxing capacity? There is a severe problem with tax revenues, and that in our general budget, according to the image we have of the 1399 budget bill, half of the revenue is going to come from taxes, and the other half is from the sale of wealth, which includes stocks and oil. This approach seems dangerous! First, we want to increase the share of taxes by 35%, in an environment where we know that we have not had real GDP growth in the last ten years, on the other hand, we have seen revenue growth of 15%! This is certainly not compatible with a 35% tax increase! Even if “VAT” is the goal, the presence of intermediaries will increase prices and make life difficult for people in essential goods!

And more importantly, when we cannot export oil, can we take foreign loans and manage current and strategic issues? The budget deficit, which appears from the same tables of the 1399 budget bill, with the registration of at least 131 thousand billion tomans – if not 200 thousand billion tomans – is almost 40% of revenues and from another perspective is equal to the total salaries and about 60% of tax revenues. “If we put aside political considerations, this is no longer a budget deficit, but a budget crisis.”

Social Consequences

The other side of the coin: the regime’s budget crisis can be seen in the disruption of the society’s structures. For example, in the latest report published by UNESCO in 1992 and its statistical data for 8 years, the Iranian government is one of the weakest countries in terms of financing government funding for education. In other words, the world average is about 82 percent, and the lowest level of government participation is 65 percent. In contrast, in the highest estimates in Iran, government participation is between 55 to 60 percent.

“The budget bill is one of the big issues in education, which includes both education and higher education. The credit for these matters in 1399 budget is about one 90 thousand billion tomans, of which about 21 thousand billion tomans is for higher education. Still, higher education must earn about five thousand billion tomans of these resources from its revenues. »

The budget of the Ministry of Education is about 57 thousand billion tomans, which has increased between 18 to 20 percent compared to last year, which means an increase much lower than the annual inflation rate. One can say that this increase will only be equivalent to a rise in the salaries and wages of education staff, without taking into account the arrears that still exist for bonuses and other issues.

According to the latest statistics of the Central Bank in December 1998 (Iran newspaper, February 15, 2020), the amount of liquidity is 2282 thousand billion Tomans or 2282 trillion Tomans, to which 1376 billion Tomans adds daily. 75% of this liquidity was deposited with the banks, and they received one trillion tomans a day – before the interest rate of the banks was reduced – and it is said that 500 people have the major part of this amount of liquidity. If half of the daily profit goes for tax, the resulting monthly income of 15,000 billion tomans can be paid to seven and a half million households (about 30 million people) of two million tomans a month as subsistence allowance. At that time, these households can be expected to comply with the coronavirus quarantine, have a livelihood, and follow health advice.

Wealthy foundations

Economic entities exist under the leadership of 9 financial institutions (military cooperatives, Martyr and Veterans Affairs Foundation, Housing Foundation, Relief Committee – Imam Economic Complex -, Foundation for the Underprivileged (Mostazafine, Razavi Economic Organization, HQ for Imam Khomeini’s order, Development of Futurists and Khatam Al-Anbia garrison ).

In an online press conference by the National Council of Resistance of Iran’s US representative office held on Friday, April the 4th 2020, the role and scope of the said foundations were revealed and discussed to details.

Over the past thirty years, these institutions have gradually become fatter in terms of wealth and liquidity. There is no precise and transparent information about the balance of activity and wealth of these institutions. A few years ago, Reuters published a report saying there were $ 95 billion in assets at Imam’s headquarters. If we consider this wealth at the day value and accept the statement of one of the previous officials of the system (Mr. Behzad Nabavi on Site Alef, September 21, 2011), who said in an interview: “Four institutions attributed to the Khamenei’s entourage, hold 60% of the country’s wealth “. He named these four institutions as the HQ for Imam’s order, Astan-e-Quds, the Foundation for the Underprivileged, and the Khatam al-Anbiya garrison – and let’s accept that this statement of Mr. Nabavi is accurate information – which should be the case. The wealth of the economic entities belonging to Khamenei’s entourage is equivalent to one thousand billion dollars. The ten percent profit of this fortune is one hundred billion dollars. This interest can pay the living expenses of ten million low-income families (forty million people), support weak people in business, strengthen the infrastructure of the health sector, harmonize the salaries of nurses with costs and problems. It can solve other government difficulties. Naturally, the difference in the life quality of Iranians after the fair distribution of this enormous wealth would justify and rationalize the value of any risk.

But despite this vast fortune, Khamenei agreed to spend only $ 1 billion on the coronavirus crisis to fight the pandemic. The enormous wealth of these holdings is devoted to regional interventionism and weapons projects of the mullahs.

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