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Iran: Criticism of Newly Proposed Budget

(Mar. 21, 2012) Iran's Parliamentary Research Center recently put forward three major criticisms of the government's budget bill for the upcoming year (1391/Mar. 20, 2012-Mar. 20, 2013), in addition to its previous critical assessment of numerous aspects of the bill in the form of 26 separate reports submitted to the Majles (Parliament), seeking that the deficiencies be corrected. According to a news report of March 5, 2012, the Research Center's new expert opinion relates to the budget bill's section on the industries and mining sector. (Iran Majles Research Center Says New Budget Bill Lacks Figures, Not Transparent, DONYA-YE EQTESAD ONLINE (Mar. 5, 2012), Open Source Center online subscription database, No. IAP20120305814005.)

First, the Research Center criticized the bill for being silent on the matter of the share of the industries and mines sector in the implementation of the Targeted Subsidies Law (as stated in article 8 of that Law). Moreover, it stated, “with numerous and limitless projections regarding the resources of the National Development Fund [Sanduq-e Towsa'eh-ye Melli] and the creation of restrictions on the industrial and mining production sector, it has in practice decreased the level of access of the industries and mines sector to this fund.” (Id.)

Second, the Research Center faulted the bill for its lack of transparency in the sections on the financing of the industries and mining sector. It cited as a matter that should be considered the allocation of resources from surplus revenues generated by the export of oil and liquid natural gas to projects related to the industries and mines sector; e.g., helping out the industries (especially new ones) and mines; providing infrastructure for industrial townships; developing investment projects that give priority to deprived regions; and increasing government assets in the banks. Because there are no specific figures set forth on the funding of such industrial and mining projects from those surplus revenues, the Research Center report states, the sector will not be able to benefit from the relevant paragraph in the budget bill on the sector's funding. Therefore, the Center suggests “that in addition to including the instances [of application of funding] related to the industries and mines sector, similar to the 1390 budget law, the share of each instance of application should be projected and determined in percentage form.” (Id.)

Third, the Research Center contends that the draft budget includes an illegal allocation of the resources of the National Development Fund (Sanduq-e Towsa'eh-ye Melli). Its report states that only 20% of the Fund's resources in foreign currency and rials were allocated to “other sectors” (except the agricultural sector, for which 20% is allocated) including industries, mines, services, oil and natural gas, construction, etc., “while the resources of the fund have been allocated illegally to various sectors, and such an action is by no means allowable in the budget.” It further states, “the allocations of the fund, according to the law, are specified by the board of trustees within the framework of the ratified law. Hence, all the allocations are a mistake and must be eliminated.” The remaining 60% of the Fund's resources, it continues, “are to be spent generally on instances that are in clear violation of Paragraph I of Article 84 of the Fifth Development Plan law.” (Id.)

President Mahmoud Ahmadinejad submitted his government's draft budget of about 5.1 quadrillion rials (about US$416 billion) to the Majles on February 1, 2012. Although the amount of the budget represents a small decrease compared to the previous year, the portion allocated to defense reportedly has been increased by 127%; the government also is seeking higher sums for development, research, and health projects. (Iran's National Military Budget Increases by 127 Percent, supra; see also Iran Majles Calls for 'Serious Reforms' to Budget for Year Starting 20 Mar 12, DONYA-YE EQTESAD ONLINE (Feb. 26, 2012),World News Connection online subscription database, Doc. No. 201202261477.1_94b903a2581dcc93; Ahmadinejad Submits $416b National Budget Bill to Majlis, MEHRNEWS.COM (Feb. 1, 2012); Iran's National Military Budget Increases by 127 Percent, PAKISTAN DEFENCE (Feb. 1, 2012).)

It was reported on March 13, 2012, that the Majles had approved a two-month capital budget of 22 trillion tuman (about US$18 billion) for the administration as an emergency plan for the government to receive and spend funds during that period (from March 20 to about May 20). At the same time, however, the Majles made an official announcement banning any change in how the Targeted Subsidies Law is implemented until June 20, 2012. Thus, the second phase of implementation of that Law cannot begin until after that date. (Iran Majles Allocates $17.97 Billion for Two-Month Budget Starting 20 Mar 2012, DONYA-E EQTESAD ONLINE (Mar. 13, 2012), World News Connection online subscription database, Doc. No. 201203131477.1_872d01625eaeb754.)