Tehran: Iran has announced a 20 per cent increase in public sector wages in its first budget since the return of US sanctions.
But the new budget does not say how many barrels of oil Iran hopes to sell in the next financial year, which starts in late March, but analysts believe it will be considerably less than the approximately 2.5 million it sold per day prior to President Donald Trump’s withdrawal.
The US granted waivers to eight key buyers of Iranian oil — including China, India and Turkey — though this has been a double-edged sword for Iran since it also helped push down the global price.
“Last year we faced some problems,” President Hassan Rouhani told parliament in a televised speech, referring to the widespread protests that hit the country almost exactly a year ago, sparked by anger over economic and political conditions.
“Those events caused the Americans to change their position regarding the Islamic republic and the nuclear deal.”
The speech gave only a few general points of the budget — which will now be scrutinised and voted on by parliament.
Concern over the economy pushed many Iranians to secure their savings in dollars and gold, triggering a run on the Iranian rial, which has lost around half its value since Trump announced the pullout.
“At one point early this year our foreign exchange cash reserve was practically zero, forcing the government to take hard decisions to save the country,” Rouhani told parliament.
The government has pressured exporters to return their dollars to Iran, and Rouhani said they would lose tax incentives if they failed to repatriate their cash. The central bank has used the returning dollars to shore up the collapsing rial, which has recovered to around 110,000 per dollar on unofficial exchanges.
The rial’s fall drove up prices across the board, with food and drink costs up 60 per cent in the year to November according to the central bank. The judiciary launched a fierce crackdown on currency speculators, dubbed “economic disrupters” that has seen dozens of traders put on trial and at least three businessmen executed.
But sanctions and fraud are only part of the story in an economy with many long-standing problems. Its banking sector is riddled with bad loans, while many key industries from oil and gas to construction are dominated by semi-state groups with opaque links to the government and military.