Khatami Presents $52bn Budget Bill to Majlis
The proposed budget bill for the next year, the fourth to be submitted to the Majlis by President Khatami, shows a 25 percent increase over the bill for the current year.
The Majlis open session, presided over by Speaker Mahdi Karrubi, started its Wednesday session in the presence of 208 deputies who were briefed by the president on the outlines of his proposed budget bill.
President Khatami's proposed budget bills for the past three years amounted to over Rls.233,000 billion, about Rls.275,000 billion and over Rls.358,000 billion respectively.
Head of the Plan and Budget and Auditing Commission of the Majlis Majid Ansari said here Tuesday that readiness of the Sixth Majlis and good coordination between Majlis and government promise ratification of the next year's general budget bill.
The new budget contains outlines of the Third Five-Year Economic Development Plan (2000-2005).
Like previous years the Majlis will study the bill and propose necessary amendments in accordance with the views of the majority of the MPs.
The MPs too would have a 10-day time to study the proposed budget bill and inform the Budget Commission of the Majlis of their expert opinion.
Khatami, while presenting the budget said his proposed budget bill for the next Iranian calendar year (starting March 21, 2001) is in full conformity with the priorities and orientations of the Third Five-Year Development Plan (2000-2005).
All-out, balanced and sustainable development, efforts for full implementation of the continuation, bolstering the civil society through institutionalization of people's participation and detente in international relations were among the points highlighted by the president as being underlined in his proposed budget bill.
Pointing briefly to the performance of his government in the past three years, President Khatami said that public trust in the administration of the country at national level and elevation of the prestige and dignity of the Islamic Republic at international arena have provided unique opportunities for realization of economic programs.
He said despite the serious bottlenecks caused as a result of the drop in government revenues in the period 1376-1377 (1997-1998), progress of the state economy was not halted and during 1376-1378 (1997-1999) gross domestic product at fixed prices registered an average increase of about 2.9 percent annually.
Given the average annual population growth rate of about 1.4 percent, the per capita income in the past three years has shown an average increase of 1.5 percent per year, he said.
Growth in revenue is an important criteria indicating improvement of the living condition of people, said the president, adding that statistics released by the Central Bank of Iran (CBI) and the Management and Planning Organization (MPO) shows that gross domestic product by the end of the current Iranian year (ending March 20, 2001) will reach about 5 percent which is even higher than the predetermined target for the first year of the Third Plan.
Realization of such a growth is important for two reasons, said Khatami, firstly it shows that the economic system is moving in the direction of realization of mid-term targets of the Third Plan and secondly it proves that contrary to the claims of the opponents on alleged deterioration of economic condition of the Iranian households, economic situation of the people has rather improved.
Pointing to the irregular rise in prices in the past 20 years as one of the main economic bottlenecks in the country, the president said that the need to control inflation has been underlined both in the Third Development Plan and in the program for regulation of the economy sector.
He said inflation not only will cause flight of capitals but will also leave negative impacts on distribution of revenues whereas the prime aim of the Islamic system is to establish social justice.
The president put the average rate of inflation in the past three years at about 19 percent and compared it to the corresponding figures for the period 1371-1375 (1992-1996) when the rate stood at about 31 percent and to the Second Development Plan (1995-2000) when the figure was 25 percent.
Expressing satisfaction with the drop in inflation rate for the current year, President Khatami said according to CBI reports for the month of Shahrivar (August-September) the rate of inflation was about 13.7 percent. He said it is expected that the inflation rate will not exceed the limit of 15 percent this year which would be the lowest in the past 10 years and an indication of government's success in its efforts to check the inflation.
President Khatami rejected the "Wrong" presumption that drop in Inflation rate is an indication of stagnation in production and investment, adding that investment at fixed prices shows a remarkable rise both last year and this year
Investment last year registered a growth of about 8.2 percent and the figure is expected to be around 7.8 for this year, he further remarked.
Turning to the issue of unemployment as a major preoccupation of the government, President Khatami said that due to the rapid growth of population in the 1360s (1980s), the country is now witnessing arrival of the young work force in the labor market with an annual rate of about 2.3 percent. Therefore, at least an average growth rate of 5 percent is needed in the gross domestic product to gradually reduce the unemployment rate, said the president.
However, he stressed, there is another reason behind putting further emphasis on the creation of new job opportunities as employment of young people will eradicate poverty in low-income families and improve distribution of revenues.
To this end, statistics show that in the current year unemployment rate has been lowered by two percent as compared to the previous year, standing at about 12.5 percent.
The president said that although the rate is still high, however, it is hoped that continued growth in gross domestic product next year will further push down unemployment rate.
Elsewhere in his remarks the president underlined government's policy in supporting low-income families through granting subsidies to essential goods and said the figure which stood at Rls. 7950 billion in this year's budget will increase to Rls.10200 billion next year.
Government's subsidies mainly go for wheat, rice, cooking oil, sugar, milk, cheese and meat.
As for repayment of the government's financial undertakings, the president said currently the country's foreign debts amount to about $ 10 billion, the lowest in the past 10 years, adding that for the first time since the triumph of the Islamic Revolution (1979) the government this year managed to repay about 2300 billion rials of its debts to the banking system and about the same figure is expected to be repaid next year.
Pointing to the curb in the multiple parity rates of the hard currencies and stabilization of the national currency as another important achievements of the government, the president said that currently hard currencies are being traded at two rates -- official rate and the rate purchased from exporters.
He expressed hope that in line with stipulations of the third plan, the Iranian rial will be turned into a stable currency that could be easily exchanged with other valid currencies.
The president then turned to the progress that the country has made in other areas and said in the public education the literacy rate for 6 year olds and above has reached 83 percent.
In the field of higher education the number of students reached 1.400 million this year and is expected to increase to 1.800 million next year.
He also pointed to the launching of 5 dams which added over 300 million cubic meters to the annual capacity of surface water reserves. He said with the operation of the large Karkheh Dam next year this capacity will increase by an addition of 3306 million cubic meters.
He further added that 252 national plans are under implementation or study in the water sector.
President Khatami also pointed to the implementation of about 300 industrial projects, including 32 important plans, in 1999 which created about 44,800 job opportunities.
He said 12 giant petrochemical projects are underway which, once operational, will increase the production capacity of petrochemical substances by 8.9 million tons to 24.6 million tons.
President Khatami stressed on attraction of foreign investment and stabilization of rial parity rate against the main international currencies. "Low forex rate is by no means artificial and completely natural and some maintain that the government should be forced to halt the downward trend of forex rate and maybe they are right."
He reiterated that falling of forex rate demonstrates the economic success of the Islamic system after passing perilous crises each of which could create tensions in the society.
Khatami expressed his hope that the national currency will further boost in the upcoming years.
Governor of the Central Bank of Iran Mohsen Nourbakhsh said here Tuesday that Iran expects to generate record revenues of 21.5 billion dollars from oil sales in the year to March 2001 thanks to robust surging prices.
The government originally forecast revenues of 11.8 billion dollars for the current fiscal year, down from 13 billion the previous year.
The government is basing its budget on an oil price of 20 dollars per barrel, parliamentary officials said.
The second largest oil producer of the Organization of Petroleum Exporting Countries (OPEC) after Saudi Arabia, Iran generates 85 percent of its foreign exchange earnings from the sale of oil.
Elsewhere, commenting on the revenues from the oil sector, Khatami said that the production of petrochemical products would rise by 5.3 percent next Iranian calendar year.
He said that Iran produced 3,736,000 barrels per day of crude oil for domestic consumption and 2,220,000 bpd for exports last year which showed a 5.5 percent growth compared to the year before. Khatami added that the figure is expected to hit 3,820,000 this year.
Khatami said 950 megawatts of electricity has been added to the capacity of the power stations last year which is expected to amount to 1,534 megawatts next year.
President Khatami further said that despite a considerable surge in government's forex revenues as a result of higher oil prices many real constraints such as lack of adequate markets in the country, inefficiency of executive organizations and insufficient human and physical capacities remained which would make it impossible to solve the existing problems within a limited time period of one year.
"Moreover we should consider next year's budget as a part of the Third Development Plan (March 2000-March 2005) ratified by the Majlis earlier," President Khatami pointed out.
The president further said that in preparing the next year's budget bill, guidelines set by Leader Ayatollah Ali Khamenei, goals and policies envisaged in the Third Development Plan as well as the economic rehabilitation program and policies previously declared by the government had been taken into consideration.
The president also said that the budget will seek to pave the grounds for formation of additional capital to contribute to further enhancement of level of production and employment in the country.
Reigning in inflation, promoting the level of efficiency and productivity of executive organizations, and strengthening the national currency are among the major goals sought by the 1380 draft budget bill, the president noted.
Embarking on attempts to increase non-oil commodities, bringing about social justice, protecting the work force and fighting against poverty are also among the important goals of the next year's draft budget bill, President Khatami stressed.
As envisaged in the Third Development Plan, lowering the rate of unemployment is one of the goals of the budget bill which aims at reducing the rate to below 12 percent, the president said.
President Khatami also said that creation of new jobs, particularly for the youth, has been stressed in the next year's budget bill.
According to the president, share of development expenditure in the next year's budget has been increased to 24.9 percent compared to last year's 23.7 percent and credits allocated for research studies have been increased to 0.0043 of the GDP (gross domestic product) from last year's 0.0034 percent.
Although some additional expenditures have been earmarked for increasing salaries of state employees and higher subsidies on basic commodities, current expenditures of the government will not be increased by more than 12 percent, the president emphasized.
The president said that out of the Rls.449,405 billion budget, 159,332 billion are allocated to the government's general budget which shows an increase of 24.7 percent over the corresponding figure for the current year.
The general budget is comprised of Rls.22,717 billion of expenditures out of exclusive revenues, up by 37.8 percent over the same figure for the current year.
The budget for state-owned companies, nonprofit making institutes affiliated to the government and banks has been estimated at 298,738 billion, an increase of 24.4 percent over the corresponding figure this year. Out of the figure, 264,897 billion rials belong to the state-owned companies, 6,861 billion rials to nonprofit making institutes affiliated to the government and 26,979 billion rials to the banks.
In comparison to the current year's budget, in the budget bill for the year 1380 the ratio of tax revenues to current expenditures has increased from 40 percent to 42.8 percent, oil revenues to total government revenues decreased from 52.2 percent to 50.6 percent and development credits to the general budget increased to 24.9 percent from 23.7 percent, showing the sound orientation of the government in formulating the budget bill.
In the formulation of the state budget, the government has followed the policy of not borrowing from the banking system within the framework of the predetermined targets stipulated in the Third Development Plan, the president said.
The general revenues of the government has been estimated at 135,370 billion rials which shows an increase of 22.6 percent compared to the same figure for the current year.
Out of the figure, 32.5 percent belong to the tax revenues, 50.6 percent to oil revenues and 16.9 percent to other revenues, he added.
Government expenditures in the next year budget are estimated at 136,615 billion rials, up by 22.7 percent over the corresponding figure for the current year, President Khatami stated.
The share of development credits in the total government expenditures has increased from 23.7 percent for the current year to 24.9 percent next year.
He further added that the total investment to be made by state-owned companies, nonprofit making institutes affiliated to the government and banks in the next year would amount to over 102,000 billion rials of which about seven percent would be maintained through sources of the general budget and the remaining out of banking facilities.
The number of state-owned companies and nonprofit making institutes affiliated to the government which stood at 550 in the current year's budget has reduced to 505 the next year, he said.
The president said that in the formulation of the budget for the state-owned companies and nonprofit making institutes affiliated to the government, attention has been paid to the principle of economizing and to reliance on domestic sources instead of using general revenues.
In conclusion, President Khatami said that the plan for development can be realized through loyalty to the basic ideals of the Islamic Revolution, adding that this could be achieved through institutionalized administration of the country, safeguarding rights of the people and abiding by the responsibilities of the administration as stipulated in the Constitution.
Stressing that today the country is in need of an institutionalized, rational and realistic approach more than ever before, the president expressed the hope that the next year budget bill will be assessed, approved and implemented on the same basis.
Meanwhile, in a letter to President Khatami more than 170 MPs yesterday asked the executive chief to take stern measures to assist the raisin exporters.
The letter which was read at the end of the Majlis open session by Mohammad Qomi said, although our country is third world's exporter of raisin, the oversupply by other exporters has adversely affected the prices in international market.
Iran exported 92,000 tons of raisin last year fetching 70 million dollars.
The production of export quality Raisin in Iran has increased from last year's 92,000 tons to 140,000 tons this year.
While other countries provide the producers with subsidies to keep their competition power at international market, the letter, said, the government must take some measures to help the Iranian exporters under the present hard circumstances.
The MPs called on the government to earmark 100 billion rials of subsidies for the exporters and producers of raisin.
Meanwhile, some 100 MPs in a letter to president informed him that the Municipality is not implementing a law which was approved seven years ago. The law states that the taxes levied on any district must be spent for that districts not others.
SIDELINES
President Khatami Presented draft of annual budget on Wednesday and senior government officials were present in the Majlis
Central Bank Governor Mohsen Nourbakhsh was absent
Several MPs were disappointed by the figures the president gave while presenting draft of the budget
Khatami said unemployment has dropped by two percent points to 12.5 percent.
Inflation around 20 percent of last year was contained and is expected to stay below 15 percent this year.
MPs disagreed with Khatami on the figures
Journalists, covering Majlis proceedings, were also not happy, as Khatami did not answer to all of their questions.