January 2003 / No. 21

Economy

Budget Draft Sending Signals

President Mohammad Khatami submitted the 859,743 billion rials national budget bill to Parliament in mid-December. While presenting the bill, Khatami highlighted the budget’s 21% anticipated growth rate compared to 2002. He indicated that, with an 11% growth, the government’s general budget was at 285,160 billion rials.

Khatami attributed the 9.9% value appreciation in the agricultural sector to better weather conditions, and predicted a 4.7% increase in 2003. He predicted that if OPEC does not reduce its production quotas, the oil and gas sector will experience a 2.4% value appreciation. He added that the value appreciations of 11.2% in mines and metals, 8.9% in trade, 5.2% in transportation and 11.9% in communications will continue in 2003. 

Khatami stated that Iran’s gross domestic production (GDP) has currently surpassed 6% and will reach 6.5% by March 2003 and will stabilize at 6.1% by the end of that year. He hoped that increased economic stability and the consequent opportunities in a calm environment will further raise the GDP in 2003.

He reported that Iran’s gross domestic permanent investment saw a 10.9% growth in 2002 and is expected to have a further growth of 8.8% in 2003. Private sector investment had a 10.7% growth in 2002 and is set for another 9.8% in 2003. He explained that workforce efficiency ratings climbed in the 1997-2001 period from a base level of 100 in 1997 to 107.7 in 2001 – it is projected that the rating will continue to grow at 1.7% in 2003. He added that social welfare standards rose by 3.7% during the 1999-2001 period, largely due to increased subsidies and governmental efforts in achieving social justice and equitable revenue distribution. Due to the economic prosperity experienced in 2002 it is expected that social welfare standards will rise by 7.1% and this rise will continue in 2003.

The President pointed at creating employment opportunities and battling unemployment as the main objectives of the 2003 budget bill and said in addition to the expeditious completion of construction projects, which will result in increased production and employment, the government intends to create a greater capacity for benefiting from foreign finances and resources. To this end, the government has allocated 4,500 billion rials from the general budget and approximately $4 billion from the oil stabilization fund. “We are hopeful that with the creation of 550,000 permanent employment positions and an economic growth of 6%, we will utilize our maximum employment capacity in 2003.”

He cited the following as key government strategies in the 2003 budget bill: concentration on foreign trade, lowering the government to a more reasonable size, continuation of budgetary structural reform, creating transparency in the government’s income and expenditure including the allocation of $1.8 billion to cover the difference between the rial and the dollar in an attempt to achieve currency cost stability and uniformity, reserving subsidies for essential supplies only and attempting to make subsidies purposeful, paying attention to environmental issues, development of information technologies, facilitating women participation, reforming the bureaucratic structure and allocating at least 3,000 billion rials for the further utilization of information technologies.

Khatami reminded that utilizing the nation’s material and spiritual wealth is dependant on its concentration on national and international opportunities. With coordination and cooperation Iran can extend its role and presence in the international arena to a degree that it would attract investments and minds.