Accessibility links

Ahmadinejad Submits Ambitious Budget

Iran President Mahmud Ahmadinejad

Iran President Mahmud Ahmadinejad

Iranian President Mahmud Ahmadinejad has presented his draft annual budget to parliament, telling legislators that "special attention" has been paid to reducing Iran's dependence on oil revenue but offering few details.

Iran's economy relies heavily on oil exports, which supply 40-50 percent of budget revenues.

Ahmadinejad did not give the overall size of the budget, only noting that there was "nothing complicated or untransparent" about it.

The Iranian president's proposal, however, is nothing short of ambitious. Within the framework of a larger five-year plan, the budget anticipates that Iran's economy will grow at nearly a double-digit rate.

"I hope that with the coordination and sympathy that exists among lawmakers, the government, organizations and the people during the five-year development plan, with growth of 8 percent, Iran's economy can become one of the leading economic powers in the region and the world," Ahmadinejad told legislators.

According to official figures, economic growth in Iran reached only 2.5 percent in 2009, amid a global slump.

Rahim Membini, the president's deputy in charge of Iran's budget affairs, told the official IRNA news agency that the budget was based on a target oil price of around $60 per barrel. World crude prices are currently hovering around $75 per barrel.

Illusory Windfalls?

High oil prices in recent years have brought in a windfall for the Iranian government, but critics accuse the authorities of squandering the money.

Ahmadinejad said controversial plans to phase out subsidies on energy and staple foods, which were approved by Iran's Guardians Council earlier this month, will go ahead starting in the next budget year.

The government hopes to save up to $100 billion over the next three to four years, as it lifts price controls on petroleum products, electricity, water, wheat, milk, rice and fertilizer -- to name just some of the key goods whose consumer prices are currently kept artificially low.

Gasoline costs the equivalent of just 10 cents a liter for Iranians, one of the lowest prices in the world.

The Iranian president told parliamentarians that annual inflation would drop to 5 percent as a result of the subsidy cuts. He did not explain.

Annual inflation officially stands at 13 percent in Iran, although independent economists say the actual rate is higher. Those economists have forecast that in the short term, lifting price controls will in fact send inflation shooting upward, rather than reduce it. It could prove a volatile mix amid continued unrest over June's contested presidential election.

The budget requires approval of the parliament and a constitutional watchdog before it can go into effect. The Iranian New Year begins on March 21.

More Nuclear 'Good News'

Also today, speaking separately to reporters in parliament, Ahmadinejad promised an announcement next month about further advances in Iran's controversial nuclear program.

"We will soon have good news over production of 20 percent enriched fuel," Ahmadinejad said. "As well as this, there is news about the country's recent achievements in science and technology -- issues which will make the Iranian nation and other independent nations happy."

The United Nations' atomic watchdog, the International Atomic Energy Agency (IAEA), has offered Iran a proposal under which most of Iran's low-enriched uranium of 3.5 percent would be sent abroad in one batch for further enrichment and then returned to Tehran as nuclear fuel, obviating the need for Iran to continue enriching its own fuel.

Enriched uranium of 20 percent purity can be used as fuel to power nuclear reactors.

But Iranian officials have offered a counterproposal of a phased fuel swap and Foreign Minister Manuchehr Mottaki gave the IAEA an end-January deadline to accept the Iranian plan.

World powers led by Washington oppose Iran enriching its own uranium as they fear the program could eventually be used to make the fissile core of an atom bomb.

Three sets of sanctions have already been imposed on Tehran over its nuclear program and the United States and its allies have indicated it may be time for a fourth, although Russia and China for now oppose such plans.

Tehran says its nuclear program is aimed solely at generating electricity.