Worrying signals in Iran’s construction sector

Worrying signals in Iran’s construction sector

Dalga Khatinoglu, Trend's Iran News Service Chief/

Iran's parliament has rejected a government supported bill on Nov.20, which was concerned about bartering $1 billion worth of crude oil with the required tar for construction contractors.

Notwithstanding that parliament had not ratified oil-tar bartering, according to Mehr News Agency, the Iranian government started illegally bartering crude oil with tar two months ago.

According to the aforementioned bill, the government would provide refineries with crude oil free of charge and then they supply bitumen production units free of charge with their raw materials through processing the crude oil. Bitumen producers would deliver their products free of charge to the Ministry of Roads and Urban Development in order to be handed over to contractors as payment of government's debts.

The Iranian government that has reportedly been faced with a huge amount of budget deficit, decided to deliver its assets to contractors instead of paying off its debts through using cash.

Iranian Parliamentary Economic Committee Chairman Gholamreza Mesbahi-Moqaddam said on Nov.3 that the Iranian government would face a $50 billion budget deficit in the current calendar year. Iran's total annual budget amounts to $461 billion.

During discussions over the bartering oil-tar bill, some MPs gave statistics about Iran's construction sector which is worrying signal.

MP Gholamreza Taj-Gardoon spoke in favour of the bill, saying that just $8.1 billion of the planned $32 billion development budget has been allocated, whilst another MP Ahmad Tavakkoli said that only $3.14 billion of the budget has so far been allocated during the first seven months of the current solar year.

In other words, taking into account the fact that Iran's current solar year will end in four months and the winter season is arriving, there will be a significant decrease in construction activities, with the Iranian government allocating only a small amount of the ratified construction budget to develop this sector.

The construction sector shares seven per cent of Iran's yearly budget, while about 10 per cent of the 75-million population work or are involved in the construction sector.

Iran's Statistic Centre released a report on Oct.30, saying building materials had increased by 55 per cent, while service prices rose by 15 to 20 per cent in the first half of the current solar year which led to significant downturn in this sector and unemployment amongst workers.

The IMF had forecast on Nov.21 that the Iranian economy would shrink 0.9 per cent this year, while inflation would surge to 25.2 per cent. Stopping more constriction projects would lead to more economic damage and unemployment rate in Iran which is officially reported at 12.9 per cent, although the IMF gave a forecast of 14.1 per cent.

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