The government has received parliamentary approval of a plan to use about $4,000 million in extra oil revenue to help revive the economy. The amendment to the 2000/01 budget law goes into effect as soon as it is ratified by the 12-member Constitutional Guardians Council.
The majlis vote on 10 October allows the government to use IR 8 million million ($980 million) of the new funds to complete unfinished development projects. About IR 1 million million ($122.5 million) is to be used to compensate losses from a severe drought; an equal amount will go to state employees as bonus.
Much of the funds are to be used to provide hard currency loans to private companies for job creation projects, according to Majid Ansari, head of the majlis budget committee. The funds are to be used to boost output and employment in industry, mines, agriculture and transport and in projects to offer technical services to the private sector.
Unemployment is officially estimated at 16 per cent.
Some local economists have warned that a big cash injection into the economy could feed inflation, which fell slightly in 2000 from a recent annual average of about 20 per cent. Structural reforms are needed for a sustainable economic recovery, they say.
Extra oil income because of higher oil prices is projected at more than $8,000 million in 2000/01. The state budget projects oil prices at $15.80 a barrel, more than $10 below the price fetched so far in 2000. The extra revenue has been going into a contingency fund created in 2000 to provide a cushion if oil prices are less than anticipated in coming years.