Iran is drafting next year's budget on the premise that oil revenue could fall to zero. Kpler expects crude export income could stop around mid-December, while inflation and a falling rial squeeze households.
Iran is drafting next year's budget under the premise that oil revenue could fall to zero, after senior budget official Mohammad Ghasemi told the government on Monday to prepare for that scenario. The country appears to be weeks away from it.
Export income could stop by mid-December
Iran has loaded no crude since August 25, according to the US Treasury. Crude and condensate it held at sea outside the blockade zone fell from 88.8 million barrels on July 14 to zero by mid-October. Because Chinese buyers pay one to two months after delivery, Kpler expects revenue could stop around mid-December.
Oil accounts directly for roughly 30% of the government budget, according to Gregory Brew of Eurasia Group and Miad Maleki of the Foundation for Defense of Democracies. Maleki says Iran will run short of cash in December but will not collapse. In late October he told Fox News Digital the shortfall is "not really a collapse state".
Spending plan leans on salaries and coupons
Tehran's plan promises to keep paying salaries and pensions without printing money. Ghasemi has put salaries, pensions and debt payments at the top of a three-tier spending plan and ruled out direct borrowing from the Central Bank. The government also plans to extend its Kalabarg electronic coupon system to about 45 million low-income Iranians.
A fight over spending looms. Last year the government proposed a budget only 2% larger than the year before, and lawmakers raised that to about 30%. The government sends next year's budget to parliament between November 22 and December 21.
Prices and the rial hit households
Tehran lawmaker Hossein Samsami said eggs rose 149%, imported rice 115%, milk 113% and red meat 104% since last December. The Statistical Centre put year-on-year inflation at 88.7% in the month ending October 22. Iran has not adjusted the minimum wage since setting it in March.
The dollar's price on Iran's open market doubled over the same period, from about 130,000 toman to 260,000. Meanwhile, Iran's Statistical Centre put total GDP 10.1% lower year on year in the three months to June 20, with non-oil output down 4.6%. Esfandyar Batmanghelidj of the Bourse & Bazaar Foundation calls the situation a deep recession rather than a collapse.
Source: Oilprice.com
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