WarSclerotic

Iranian President Hassan Rouhani on Tuesday presented a $47 billion state budget with increased spending on lower-income groups, saying U.S. sanctions would affect Iranian lives and economic growth but not bring the government to its knees.

U.S. President Donald Trump pulled the United States out of the 2015 multilateral nuclear deal with Iran in May and reimposed sanctions on Iran, including on its vital oil industry.

“America’s goal is to bring Iran’s Islamic system to its knees … and it will fail in this, but sanctions will no doubt affect people’s lives, and the country’s development and economic growth,” Rouhani told the country’s parliament in a speech carried live on state television.

He gave the value of the nominally balanced draft budget, excluding the spending of state enterprises, at about 4,700 trillion rials for the next Iranian year, which starts on March 21.

That figure is up from about 3,700 trillion rials he had proposed for this year, but the new budget is effectively worth about half of this year’s budget because of the weakening of Iran’s currency.

Under the unofficial exchange rate used on the free market, the budget is worth about $47 billion.

Rouhani said state employees and pensioners would receive a 20% pay rise next year, and the budget includes $14 billion at a subsidized rate less than half of the market to provide cheap basic goods such as food and medicine, up from $13 billion in this year’s budget.

Officials have said the budget is designed to provide for the basic needs of low-income groups, including state employees and pensioners, and to support production and employment. It also seeks to relaunch thousands of stalled state projects with the help of private investors.

The draft budget has to be passed by parliament and approved by a clerical body that vets legislation before it becomes law.

Rouhani called for trimming the state sector and curbing the government’s dependence on oil income, which is forecast at 1,425 trillion rials in the proposed budget.

Officials have said the budget calculations were based on a forecast crude price of $50-$54 per barrel and exports of 1 million to 1.5 million barrels per day, down from a peak of almost 3 million in mid-2018.

“If the private sector was active in the country … and if the budget did not rely heavily on oil, the impact of the sanctions would have been much less,” Rouhani said.

A separate draft budget for state companies, institutions and banks allocates them a total of $127 billion.

Rouhani’s speech was interrupted by protests from parliament members. Iranian news agencies said the disrupters were mostly from the southwestern Khuzestan province and were protesting over shortages of drinking water in their region.