The budget bill for 2008 has allocated less developmental credits to deprived provinces than the budget bill for 2007 and the government is supposed to face a budget deficit of about 100,000 billion rials. Today, developmental budget has greatly increased and the government is focusing on it, but due to budget deficit in December through January, the government will reduce that budget to help current budget. This has happened in recent years. Majlis deputies are supposed to attach per capita budget to the Oil Stabilization Fund, so that; the government would not be able to use it. Since governments are eager to spend more money, there are mechanisms in most countries to restrict governments, especially when oil revenues are high.

They argue that since oil price is an exogenous factor and outside our control, we must invest part of oil revenues for the future. This is why the Oil Stabilization Fund was established. In Norway, the government can only withdraw one-third of its deposits, which increased to about 300 billion dollars during the current year. In Kuwait, 12 billion dollars were invested in 1990 through extra oil revenues. Other countries have taken similar steps. The important point about budget is that the government’s expenses cannot be cut in the future. The government is getting bigger every year and some expenses are inevitable.

However, the Fourth Economic Development Plan included mechanisms to downsize the government. The government was supposed to loosen its grip on most ministries through Management and Planning Organization in order to increase productivity and reengineer the government. When Management and Planning Organization was dissolved, all plans were delayed for many years. Of course, the Management and Planning Organization was supposed to do its job on behalf of the government. Therefore, now that the organization is no more in place, the government should do that. Supervisory bodies should ask the government why it has taken no steps in this regard. According to the Constitution, the president is in charge of administrative, employment and budgetary affairs. He can delegate his power to a vice president or any other state body. If the government is not made smaller, its expenses and oil dependence will increase day by day. Therefore, it would not be a remote possibility that the country’s oil export revenues may become zero by 2015. On the other hand, pressure in our oil reservoirs is falling and if gas is not injected into them oil output will decrease. On the other hand, domestic oil consumption is increasing by more than 10 percent per year. The government should see ahead to find a replacement for oil revenues (which stand at 75 billion dollars at current prices) by 2015. This year’s budget should show what role the current year’s budget can play to help the government to find that replacement by 2015? If every government just thought about its own four-year tenure, who is going to think about the incoming years?

In late December 2007, governor of the Central Bank of Iran produced figures which were not new, but accurate. He announced that since the establishment of the Central Bank in 1960 up to August 2005, liquidity stood at 700,000 billion rials. However, from August 2005 to August 2007, the figure has increased to more than 1,420 trillion rials. Such a growth in liquidity will increase inflation. The main cause of the explosion in liquidity has been financial indiscipline on the part of the government. Today, there are differences for the announcement of the inflation rate. Although the norm for determining inflation rate, is the figure announced by the Central Bank of Iran, but some experts argue against the inflation rate that has been announced by the Bank. When comparing inflation under this government and its predecessor, inflation figures in 2000 should be taken as base. Therefore, 1.5 percent should be added to present figures. On the other hand, if we took housing price and the cost of renting a housing unit into consideration, the inflation rate would go beyond 30 percent. This rate could have been presented through financial discipline. The new Australian Prime Minister, Kevin Rudd, who was elected in November 2007, announced in January 2008 that inflation was the main economic challenge before his government and noted that curbing inflation would be the main goal of his budget bill.

Inflation in Australia was estimated at 2-3 percent and it increased to 3.7 percent under the new prime minister. Just 0.7 percent rise in inflation was enough to make the prime minister show such a reaction. Kevin Rudd has announced that the government would decrease its expenses which account for 23 percent of gross domestic product and noted that financial discipline was the most important tool to control inflation. Just look how important inflation is to Australian statesmen, which makes them show rapid reactions and take action to remedy high inflation through the budget bill. In Iran, the budget should be so transparent that it would be easy to see how inflation is going to be controlled. We must learn lessons from world economies and note that aimless injection of money into the market would just add to our misery. You cannot force banks into giving loans and then blame them for ensuing problems. This behavior should be investigated. Above all, such behavior will cause us to lose opportunities. What have been the positive effects of high oil revenues over the past few years? A study shows that for every dollar increase in oil price, economic growth should rise by 0.1 percent.

That is, when oil price has increased 40 dollars per barrel, our economic growth rate should have increased fourfold. That is, the projected growth rate of 8 percent should have been increased to 12 percent. Average rate of investment, according to the Fourth Economic Development Plan projections, should have stood at 11.2 percent. Usually, investments made during implementation of development plans are at their peak in the middle of the plan. Last year, however, total investment rate of our country stood at about 3.3 percent. After deducting liabilities approved by the parliament, the balance of the Oil Stabilization Fund would hit -1.9 billion dollars. These facts show that we have strayed away from the goals of the Fourth Economic Development Plan.

The next development plan should greatly restrict government’s access to the OSF. We must not imagine that since we have a lot of oil, governments are allowed to spend oil revenues on current expenses. In countries, when governments rely on taxation for their revenues, their budgets are characterized by transparency and accountability.

As long as the government aims to control oil revenues and play ducks and drakes with them, valuable resources that should fuel the country’s development are squandered.

We must not wait for the time when oil revenues hit zero before thinking about a solution. We must take this challenge seriously right from now. If we aimed to obtain the added value of crude oil through non-oil exports, we should have increased our non-oil exports to 700-800 billion dollars.