Iranian President Hassan Rouhani on December 8 presented a draft “resistance budget” of around $39bn (at the free market rate) to parliament that has the “least possible dependence on oil” in order to shield Iran from US sanctions.

Tehran has since May been struggling against a big stepping up of sanctions applied by Washington which is designed to force Iran’s lifeline exports of crude oil to zero. There is substantial evidence that Iran is still managing to ship a significant amount of oil but the draft budget pencils in a gap caused by lost oil, gas and condensates revenues—which it forecasts will fall 40% in the 2020/2021 Iranian financial year—that it plans to address by generating funds from state bonds and selling state properties.

“This is a budget to resist sanctions … with the least possible dependence on oil,” Rouhani told parliament in remarks broadcast on state television. “This budget announces to the world that despite sanctions we can manage the country,” he added.

He gave the value of the nominally balanced draft budget at 4,845tn rials for the financial year starting on 20 March.

Budget’s dollar value down

The new budget is 10% bigger than that of the 2019/2020 financial year in local currency terms, although its dollar value has decreased given annual inflation running at around 35%.

The International Monetary Fund (IMF) has indicated Iran would need oil prices to be triple current levels to balance its budget because of the plunge seen in the volume of its crude exports. The IMF has forecast an Iranian fiscal deficit of 4.5% of gross domestic product in 2019-20 and 5.1% in 2020-21.

Preliminary reports by Iranian news agencies said the budget appeared to be based on oil sales of 500,000 to 1mn barrels per day.

Although US sanctions on Iran’s oil industry have slashed the Opec member’s crude exports by more than 80%, oil product sales remain strong, generating nearly $500m a month, shipping data and Reuters calculations showed in September. Unlike Iranian crude, which has distinct characteristics that mean its origin can be traced, the source of refined and other oil products are more difficult to identify.

Rouhani added that Iran hoped a $5bn loan Iran had requested from Russia for development projects would be finalised during the budget year.

He also said that Iran would continue to subsidise basic goods and medicine in the budget, based at an official exchange rate of Iranian rial (IRR) 42,000 to the dollar, compared with the free market rate of IRR125,000. Using the lower exchange rates makes them more affordable to ordinary Iranians.

A separate draft budget for state companies, institutions and banks allocates them a total of 14,839tn rials.