Iran president targets stagflation
By Marcus George and Isabel Coles, Reuters
December 9, 2013, 12:02 am TWN
DUBAI--Iranian President Hassan Rouhani presented his first budget to parliament on Sunday, vowing to bring down inflation and boost growth to lift an economy reeling from sanctions and what he says was mismanagement by predecessor Mahmoud Ahmadinejad.
Inflation has soared for two years and productivity has slumped as ever tougher economic sanctions imposed to counter Tehran's nuclear program have taken their toll.
Rouhani says Ahmadinejad squandered vast oil revenues on cash handouts and housing projects during his two terms in office from 2005 and racked up enormous government debt.
Gross domestic product had contracted by 6 percent over the past year, Rouhani told lawmakers on Sunday, while inflation was running at 44 percent when he took office in August, a situation he described as “very worrying.”
“Employment is the most important future issue for the economy but now the biggest problem is (tackling) stagflation,” Rouhani said in parliament in an address shown live on state television.
“The combination of stagnation and inflation over the past two years was unprecedented,” he said.
Rouhani earmarked government spending for the year starting in March 2014 of US$66 billion, calculated on an open-market exchange rate.
The overall budget ceiling is estimated at about US$265 billion, Iranian media reported, leaving flexibility to lift spending depending on income received during the year.
Ahmadinejad's overall draft budget ceiling for this year was about US$200 billion but it was never approved. In August, officials under Rouhani indicated the spending plans faced massive shortfalls.