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Iran: Annual Budget Deficit and Resource Impasse

Funding the budget deficit has become a place of corruption and looting Iran’s people by government officials.

Iran’s government is facing a huge budget deficit and has no resources to fund its annual budget. Therefore, Ehsan Khandouzi, an economic expert, suggested the government in the presence of the top managers of the tax administration to increase the taxes to cover the four-quadrillion-rial [$14.466 billion] budget.

“We should try to grow the tax-to-Gross Domestic Production [GDP] ratio to 50 percent in the first four years ahead.” (Dolat.ir, August 29, 2021)

Iran experts believe that the regime will not tax its multimillion-dollar companies and institutions but will take it from the people’s pockets and low-income households most of which live near the poverty line.

Despite all the policies to resolve the budget deficit by looting the people, the government is not able to solve this challenge, because of its spending for its malign activities, while the Revolutionary Guards (IRGC) and the IRGC Qods Force are devouring all the country’s monetary resources.

Mohammad Mehdi Moffat, the spokesman for the Parliamentary Planning and Budget Commission, said:

“Due to the end of the 2021 budget consumption resources, no amendment has yet been passed to parliament by the government. We need to be strengthened in terms of resources, but the balance on paper was accompanied by some assumptions, but today, when we have passed half of the year, the possibilities for income have not been realized and the government is facing a lot of revenue problems.” (State-run daily Eghtesad Saramad, October 6, 2021)

If the regime would have a reliable source to fund the budget, usually it should be able to solve this problem, now when it has passed about two months from the start of Ebrahim Raisi’s government. But the reality is that they have no resources, except money printing, increasing the currency rate, and finally increasing the cost of goods to supply the budget deficit.

With the excuse of the budget, Raisi’s inefficient government is trying to increase the taxes, taking it from the people and small private entities.

One thing that is strange but not unexpected because of the corruption in this regime, is that the statistics of the budget resources, especially the of the taxes have been concealed.

On October 4, 2021, the state-run daily Etemad wrote: “According to the Statistics Center, the ratio of tax revenues to total revenues, the ratio of oil revenues to total resources, as well as the ratio of taxes to total GDP due to the lack of publication of statistics on the government budget does not exist since 2018.”

It is easily predictable why something like this would happen. It is due to the tax exemptions and tax evasion of state institutions, and secondly to hide the incomes of the regime’s heads and officials.

The state-run daily Aftab-e-Yazd encouraged the government to fund the deficit from the stock exchange, which is another way to loot the people, and wrote:

“Exploiting currency exchange to compensate for the budget deficit, a question that has always had a strong place in public opinion!

Exploiting the suspicious volatility of the capital market and the stock exchange, which is also rooted in many should and shouldn’t.” (Aftab-e-Yazd, October 6, 2021)

Another method that this newspaper did not mention, but which the government routinely employs, is borrowing from the Central Bank and money printing, which increases the country’s inflation.

“Because the previous government, with 50 quadrillion rials [$1.808 billion] of budget deficit in the first four months of this year, passed the budget and borrowed from the Central Bank, increased the monetary base in the country,” Mardom Salari daily quoted Ehsan Khandouzi as saying about inflation on October 3.

The issue of annual budget deficits and tax evasion of government leaders and institutions, and the lack of publication of statistics on state budget revenues, are the face of institutionalized political and economic corruption in this regime.

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