Esshaq Jahangiri, Former Minister of Industries & Mines

There are two major structural flaws within Iran’s budgeting and planning tradition of the past sixty years. Firstly, while the annual budget act is ratified for a single year, it is expected to conform to long-term outlooks delineated by the five-year economic development plans and the 20-Year Perspective Plan. However, international developments and fluctuations in oil price as well as changes in social and domestic political relations and more importantly, changes at high managerial levels have always caused serious changes in overall orientation of the budget acts. This problem has reduced the effectiveness of budget formulation in the country and has allowed it to be punctuated with frequent changes, negation of past goals leading to a significant loss of financial and human resources of the country. The entire nation has been forced to pay the price of sudden turnabouts in budgetary policies.

Secondly, the one-year budget acts have not been implemented correctly on frequent occasions despite the said changes and fluctuations. Due to the government’s control of the national economy, the formulation of an annual budget for the country has been very costly and bulky. Despite the fact that thousands of person-hours of expert, managerial and political work is allocated to the compilation of annual budget bills at various levels, the results are usually different from what has been anticipated by various development plans. Difference in outputs, both with regard to quantitative goals and in terms of qualitative objectives that are related to policymaking, has become an integral and indispensable part of budget formulation in Iran. Such repetitive cycles are not merely due to erroneous estimates and targeting, but even one-year plans drawn up within a government do not usually achieve their goals and objectives.

Moreover, the addition of frequent supplements to budget acts and the lack of reporting on the yearly performance of the government with regard to the realization of stated goals have also caused reason for concern. In this light, the Islamic Consultative Assembly should be more careful.

The process of ratifying development plans in Iran is very complicated and time-consuming. Different from the complexities of budget formulation, development plans are the product of the collective wisdom of political and legal institutions and take into account many things that should and should not be done. They also reflect the national will of the country. For example, the Fourth Economic Development Plan as well as the 20-Year Perspective Plan; are products of thousands of hours of expert discussions which start within ministries and the private sector and extend into the Management and Plan Organization, the Executive Branch, the Islamic Consultative Assembly, the Guardian Council, and even the Expediency Council. They have been approved by the Supreme Leader and their depth has been increased after going through any of the said stages. Therefore, all those efforts cannot be ignored and those plans should not be altered in such a way that would deal irreparable blows to economic and social activities.

In both the Fourth Economic Development Plan and the 20-Year Perspective Plan, the most important goal is pursuing the policy of economic liberalization while taking into account all requirements, limitations, and exigencies that exist in this regard. Following this strategy, policies aimed at de-centralization, downsizing the government, de-regulation, reducing dependence on oil revenues, increasing share of the private sector and foreign capital in capital formation and gross domestic product, organizing customs tariffs, as well as organizing the system of dispensing subsidies are major priorities of both the five-year development plans and the 20-Year Perspective Plan.

Considering limitations and complexities of Iran’s social structure and its relative vulnerability in the face of severe economic fluctuations, both the Fourth Economic Development Plan and the 20-Year Perspective Plan have defined an efficient system of social security based on three main pillars; that is, providing people with minimum requirements of nutrition, health and education as well as protecting active manpower against unemployment. If the said plans are carried out in a suitable manner, the government will be fulfilling its main role in Iran, which is to make macro-economic policies aimed at increasing sustainable economic growth, reducing unemployment, and lowering inflation rate. It will then be able to delegate all controlling powers to the private sector. The Third Economic Development Plan relatively paved the way for the realization of the above goals; so that, in 2003-04, growth in the government’s consumer expenses was less than one-sixth of growth rate of consumer expenses in the private sector and less than one-fourth of gross domestic product’s growth rate held at constant prices. This means that the government was downsized and its share in the national economy shrank at the highest speed possible.

Moreover, along with the rapidly increasing expenses, the new administration failed to achieve the three main objectives stated before, namely, lowering the inflation rate, reducing unemployment, and increasing the gross domestic product. The above factors coupled with international perspectives of the country in addition to the situation of the nuclear dossier, the instability of global crude oil markets and price trends, and higher vulnerability of the country’s social structure given higher expectations on the part of people have created undesirable conditions in the country. Runaway inflation calls upon both the Executive Branch and the Islamic Consultative Assembly to do their best to get the country out of the current predicament and get the national economy back on the right track set by the Fourth Economic Development Plan and the 20-Year Perspective Plan. The MPs should approve the annual budget bill proposed for the Iranian calendar year 1386 (2007-08) in such a way that would comply with the goals of the said two valuable economic and political documents both in policy-making and in terms of quantitative goals. In this way, the country will be spared of more damage to its economic and social structures and the situation will not reach a point of no return in terms of economic reforms.