Presenting the 2008/09 budget to the Majlis (parliament), President Mahmoud Ahmadinejad revealed an IR2,745 trillion ($295bn) budget for the next Iranian year, which begins on 21 March.
The budget is based on a conservative oil price of less than $40 a barrel, well below international crude prices, which hit an all-time high of $100 in early January.
Within the budget, IR715 trillion has been allocated for central government spending, and a further IR2,030 trillion for state-run companies, including banks.
Ahmadinejad said subsidies on products such as petrol and bread would be increased by a small amount, but provided no details.
He said the main reason for the rise in spending was because of a 30 per cent increase in funding for infrastructure projects.
The budget is unlikely to do much to halt inflation in the country. Tahmasb Mazaheri, governor of Central Bank of Iran, said on 9 January that inflation was running at 17.2 per cent in December 2007. Independent observers place it close to 20 per cent.
The cabinet ratified the budget bill on 2 January. The Majlis is expected to approve it by late February, ahead of elections in March.
Ahmadinejad defended the government against critics who claim it has been too quick to raid its Oil Stabilisation Fund. “The government has not done so,” he said. “We know that the goal of the legislative body and the government is limited in its use of the resources.”