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Iran outlines budget to resist US sanctions as oil exports plunge

Iranian President, Hassan Rouhani addresses to people during his visit in Yazd province of Iran on 10 November, 2019 [IRANIAN PRESIDENCY/HANDOUT/Anadolu Agency]
Iranian President, Hassan Rouhani addresses to people during his visit in Yazd province of Iran on 10 November, 2019 [IRANIAN PRESIDENCY/HANDOUT/Anadolu Agency]

Iran’s president presented a draft state budget of about $39 billion to parliament on Sunday, saying it was designed to resist US sanctions by limiting dependence on oil exports, reports Reuters.

Officials have not given figures for the oil price and export volumes used in the calculations, although the IMF has indicated Iran would need oil prices to be triple current levels to balance its budget as its crude exports have plunged.

The United States reimposed sanctions with the aim of driving down Iranian crude sales, the Islamic Republic’s main source of revenues after Washington withdrew last year from a nuclear pact between world powers and Iran.

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“This is a budget to resist sanctions … with the least possible dependence on oil,” Iranian President Hassan Rouhani told parliament, according to state television.

“This budget announces to the world that despite sanctions we can manage the country,” he said.

He gave the value of the nominally balanced draft budget at 4,845 trillion rials, equivalent to $38.8 billion at the free market exchange rate, for the Iranian year starting on March 20.

The new budget is 10% bigger than this financial year in local currency terms although its dollar value is lower due to annual inflation that is running at about 35%.

The budget forecasts revenues for oil, gas, and condensates falling 40%, leaving a gap it plans to plug by using state bonds and selling state properties.

Preliminary reports by local news agencies said the budget appeared to be based on oil sales of 500,000 to 1 million barrels per day (bpd). Under US sanctions, analysts estimate Iran’s oil exports have tumbled to about 400,000 bpd or even lower, from more than 2.5 million bpd.

READ: Iran’s central bank proposes slashing four zeros from it’s currency

The International Monetary Fund has said Iran would need an oil price of $194.6 a barrel to balance its budget in 2020/2021 and forecast a fiscal deficit of 4.5% of gross domestic product in 2019/2020 and 5.1% in 2020/2021.

Benchmark Brent oil closed at $64.38 on Friday.

Analysts have said Iran had probably been forced to sell its crude at a discount to normal levels, as it seeks to entice buyers wary of violating US sanctions.

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