President Mahmoud Ahmadi-Nejad will on Sunday present his second annual budget to the Iranian parliament in the face of bitter criticism over his government's economic mismanagement and growing reliance on oil revenue.
Most deputies come from the same conservative camp as the president, but relations have been bad since, shortly after his election in 2005, parliament rejected his first three nominees for oil minister.
The poor showing of Mr Ahmadi-Nejad's allies in December's local elections has emboldened critics, raising questions of how long he can keep his present economic course.
The president has been cushioned by oil income of about $52bn (€40bn, £26bn) in the current Iranian year ending on March 20, giving leeway for pet projects and continuing costly subsidies on staples such as bread, medicine and energy.
Growth is about 5 per cent and external debt below 4 per cent of gross domestic product, but Iran's reliance on oil revenue – it is Opec's second largest producer – has increased as the government has reversed the economic liberalisation of its predecessors.
The private sector is demoralised, with the Tehran stock exchange stagnant and down 20 per cent since Mr Ahmadi-Nejad became president. Investors are short of funds as foreign banks limit exposure – due in part to anxiety over US pressure on the banking system – and domestic banks bemoan low liquidity. The London-based Economist Intelligence Unit puts 2006 consumer price inflation at 15.8 per cent.
Some in close contact with economic ministries in Iran say they are in a state of chaos. In October, Mr Ahmadi-Nejad restructured the Planning and Management Organisation (PMO), disrupting its role in drawing up the budget. Baztab, a conservative website, this week said the PMO was in "hibernation".
"The government's monthly reports on expenditure and revenue to the Majlis [parliament] are not done professionally and are invariably late," said a leading business journalist. "The main budget is 85 per cent transparent, but the 15 per cent contains vital information, like the level of current deficit."
Under the previous presidency of Mohammad Khatami, both government and parliament funded a small deficit by raiding the Oil Stabilisation Fund (OSF), which collects windfall oil income for infrastructural investment and to hedge against any fall in the oil price.
But Mr Ahmadi-Nejad's opponents say he is bleeding the fund dry, even if the accounts lack transparancy. Last summer the central bank governor estimated the OSF would contain $14.5bn by year-end, already less than the $18bn it contained in March 2006. But Morteza Tamaddon, a member of parliament's budget commission, recently claimed only $9bn remained of which $8.5bn was committed.
Concern among deputies and economists is heightened by darkening international clouds, with Iran likely to ignore the United Nations Security Council deadline to suspend most nuclear activities by late February.
In an interview this week with "Iran" newspaper, Ahmad Mousavi, vice-president for parliamentary affairs, seemed unruffled. He said the budget would reduce dependence on oil, halve petrol imports to $2.5bn through rationing and strengthen the private sector by giving $3bn to state banks for cheaper loans.
But Mr Mousavi gave no overall figure for spending. Economists still argue over this year's increase, with leading monthly "Iran Economics" putting it at 20 per cent, well ahead of inflation.
Nor did Mr Mousavi reveal the government's assumption over oil prices, even though oil's contribution to government revenue – according to one leading deputy – has increased from 60 to 70 per cent under Mr Ahmadi-Nejad. The global oil price has fallen 15 per cent in recent months and briefly dipped below $50 a barrel this week.
While the budget is likely to pass, even if amended, this is unlikely to stem the criticism.
The president's critics are discussing options like parliamentary impeachment or whether Ayatollah Khamenei, who holds the final word on important matters, should impose ministers. -- Yoshie <http://montages.blogspot.com/> <http://mrzine.org> <http://monthlyreview.org/>