DUBAI - Iran's parliament has passed a three-month stop-gap budget while it debates President Mahmoud Ahmadinejad's full-year spending proposals, delivered nearly 90 days late at a time when economic sanctions have cast doubt over future revenue.
This year will be the third in a row that parliament has been unable to pass a full-year budget in time for the March 21 start of the Iranian calendar and fiscal year. Western sanctions over its disputed nuclear program have cut oil exports by more than half over the past year, sharply reducing Iran's income.
"This short-term budget shows that planning beyond 90 days has become impossible because of sanctions," said Iranian-born economist Mehrdad Emadi of the Betamatrix consultancy in London. "The government faces huge uncertainties."
The temporary "three-twelfths" budget authorizes spending of 450,000 billion rials total for the first quarter of the year, Fars news agency reported. That is roughly equivalent to a single month's spending in rial terms in last year's budget, or $13 billion at the current open market exchange rate.
Ahmadinejad proposed the temporary budget as a stop-gap last month when he asked lawmakers to consider his long overdue draft for the full year.
His full-year budget foresees a 31 percent increase in spending in domestic currency, amounting to a cut in dollar terms as the rial has halved in value over the past year on the open market.
Ahmadinejad, coming to the end of a second and final four-year term, has often quarrelled with parliament over economic policies, including cuts in subsidies for food and fuel.
Iranian state media quoted lawmakers who saw the temporary spending bill as a necessity but expressed frustration with the need to resort to such bills. Parliament needed a two-month stop-gap before it passed last year's budget.
"Last year the government presented two-twelfths to parliament and this year it is three-twelfths. Maybe next year it will be four-twelfths," said member of parliament Mehdi Sanaei, according to state news agency IRNA reported. "This sort of budget-writing is incorrect and it must be reformed."
The International Energy Agency, which advises rich countries, estimated last week that Iran's oil exports may have dropped below 1 million barrels per day in January, from 2.2 million bpd in late 2011.
New sanctions imposed by the United States and European Union since the start of 2012 banned Iranian oil sales to Europe, and made it difficult for other countries to pay for Iranian oil or for ships that carry it to get insurance.
Western countries accuse Iran of seeking a nuclear weapon. Tehran says its nuclear program is peaceful and the sanctions are a form of economic warfare.
The temporary budget must be ratified by the parliamentary Planning and Budget Committee and the 12-member veto-wielding Guardian Council of jurists and clerics, Fars reported.
Dependence on oil
The full draft budget amounts to 7,305,000 billion rials - $595 billion at the official exchange rate, but only around $200 billion at the free market rate. The 2012 budget was 5,560,000 billion rials.
In a television interview before the budget draft was presented, Ahmadinejad said it would reduce Iran's dependence on oil income and boost non-oil exports, to limit the impact of "heavy factors active from outside".
He said non-oil exports of goods and services could reach $75 billion in the coming year, a 50 percent increase compared to estimated figures for this year.
The draft budget did not give an estimate for oil exports for the forthcoming year. Iranian media said it was based on an average oil price of $95 per barrel. Brent crude oil is now at about $110 a barrel.
The approval process for the budget is likely to be hampered by the deep political divisions between the president and a mainly hostile parliament who accuse him of reckless financial management they see as a major cause of Iran's economic pain.
The president also drew parliamentarians' ire by proposing to increase funding for the executive branch while cutting the budgets of other state bodies, including parliament.