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Guardians Council Approves Iranian Government's Budget

Iranian President Mahmud Ahmadinejad presents his proposed budget in parliament on January 24.

Iranian President Mahmud Ahmadinejad presents his proposed budget in parliament on January 24.

TEHRAN (Reuters) -- Iran's Guardians Council has approved the government's budget for next year, news agencies said, the last hurdle for spending plans which include cuts in state subsidies.

"The Guardians Council has completed its studies on the next year's budget bill, which was approved by the parliament after necessary modifications," Fars news agency said, quoting Abbas Ali Kadkhodai, spokesman of the top legislative watchdog.

"It was approved by the council and sent back to parliament to submit to the government for implementation."

The Iranian new year begins on March 21.

The budget does not contain radical cuts in subsidies sought by President Mahmud Ahmadinejad but could still stoke inflation or provoke unrest in a country already plagued by tension after street protests by opponents of Ahmadinejad over the past year.

The government proposed saving $40 billion by reforming the Islamic republic's costly subsidy system but parliament only approved half of that amount last week.

The Guardians Council must sign off on the budget before it can become law.

Analysts say the subsidy cut will make Iran less vulnerable to any United Nations sanctions on its gasoline imports and would also allow Ahmadinejad to channel some of the cash saved directly to constituents who support him.

The government projects revenues of 596 trillion rials (about $59.6 billion) in fiscal 2010/11, a senior official has said, which will result in a $6 billion deficit.

That includes plans to phase out subsidies on food and energy during fiscal 2010/11 -- which begins March 21 -- which the government has already said will add 15 percentage points to its average inflation forecast of 10 percent in 2010/11.

Analysts estimate the cuts could send inflation back up to 30 percent or more.

Inflation currently stands at 8.9 percent but is on the rise again after coming down from nearly 30 percent since late 2008.

Iran is the world's fifth-largest crude exporter. But while oil prices have surged, Iran's economy has slowed as a result of the global economic downturn, political isolation, and sanctions over its nuclear energy program. Analysts estimate it probably will have grown just 0.5 percent in the year ending March 2010.