Unified exchange rate used in new budget

04 January 2002

President Khatami on 23 December presented to the Majlis (parliament) the budget for the financial year starting 21 March, which, for the first time, will incorporate a single exchange rate for the rial. The rate applied in the budget is $1=IR 7,900, which is close to the rate quoted on the free market. The move is part of the abolition of the fixed $1=IR 1,750 rate used mainly for state imports of basic commodities.

The exchange rate adjustment is thought to be a major factor in the sharp rise in total budget spending to IR 663.7 million million ($84,000 million) for 2002/03. Khatami said the new spending figure was 45.6 per cent higher than in 2001/02. He did not provide further details of the new budget, other than to specify that $4,800 million had been set aside for subsidies.

No figures were released for projected revenues. However, government officials have been quoted as saying the budget is close to being balanced. The government is reported to have based the new budget on an oil price of $18 a barrel, compared with an estimate of $17 a barrel for 2001/02.

Khatami said that real gross domestic product growth is forecast to be 5.5-6.0 per cent in the coming financial year, compared with 5.9 per cent in the current year. He said inflation is expected to remain between 12 and 14 per cent. He put Iran's total external debt at just $7,000 million. Unemployment remains at some 15 per cent of the workforce, he said.

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