Construction projects to eat up most of Iran’s military budget

Baku, Azerbaijan, Dec. 15

By Umid Niayesh - Trend:

The Iranian government has offered a 32.7 percent rise in defense expenditure in next year's budget bill (to start March 21, 2015) compared to current year's budget, most of which will be assigned to the Islamic Revolutionary Guards Corps (IRGC).

IRGC budget has increased to 174 trillion rials (about $6.11 billion based on official rate of each USD at 28,500 rials in the budget bill), of that amount about 100 trillion rials (about $3.51 billion) is allocated to Khatam-ol Anbia Construction Headquarters, some 60 percent of IRGC's total budget for next year.

Considering the fact that the headquarter carries out construction and development projects, the increase in the next year's military budget is mainly amid to development projects rather than military purposes, head of Iran World Trade Center Mohammad Reza Sabzalipour told Trend Dec. 15.

The name of military entities

Current budget law/ based on each USD at 26,500 rials

Next year budget bill /based on each USD at 28,500 rials

Y/Y change based on USD

Y/Y change based on Iran's natural currency, rial

Defense ministry

791.67 million

934.95 million

18%

27%

Army Forces

1,973.04 million

1,863.47 million

-4.5%

1%

IRGC

4,365.64 million

6,115.41 million

40%

50%

Basij Resistance Force

321.60 million

310.84 million

-4%

1%

Staff of the Iranian Armed Forces

554.70 million

658.61 million

18%

27%

Total

8,006.65 million

9,883.30 million

23%

32.7%

Khatam-ol Anbia, affiliated with the IRGC is a giant company firm with 25,000 employees. It controls over 812 registered companies inside and outside Iran. Some 10 percent of
the company's employees are IRGC members and the rest are contractors. The
company is also connected to Iran's oil and gas industry.

However Sabzalipour forecasted that the administration would not be able to meet all the projected budget of the IRGC and its subsidiaries including Khatam-ol Anbia due to severe deficit in the budget.

Next year's national budget bill is based on an oil price of $72 per barrel and a projected average exchange rate of 28,500 rials to the U.S. dollar for the fiscal year, which means the government should sell one million barrels of crude oil per day to meet the main part of the budget, he added.

Considering the sharp fall of the crude price in current year, the administration will face severe deficit in current fiscal year's (started on March 21) budget that will be transferred to next year and will impose double pressure on the next year's budget, Sabzalipour said.

He explained that the current price of crude is $60 per barrel, even $10 less than the predicted figure in the budget for the next fiscal year.

The falling trend of oil price in global markets is expected to continue at least until the first quarter of 2015," he said, adding that the prices may drop to $45 per barrel, which will impose a higher deficit in the budget.

On the other hand, nuclear talks between Iran and the P5+1 is extended for seven months which means till summer various economy sectors will experience uncertainty which will prevent prosperity of the economy, Sabzalipour said.

So the administration's expected incomes through customs and tax revenues also will not be materialized by 100 percent in the next fiscal year, he underlined.

Sabzalipour predicted that the government will spend the budget more rhythmically to reduce the deficit and delay increasing it as far as possible.

He said that raising the demand level of the different civil and military sectors is very dangerous for the government and the country, if the administration is not able to meet that.

Sabzalipour also said that the administration plans to cover some part of the next year's budget through selling military service of 'absent' soldiers.

There are about 1.5 million absent soldiers and their military service is planned to be sold for 200 to 500 million rials which will bring over 450 trillion rials income to government.

The administration has allocated some part of the mentioned figure to military sector.

The government's proposed national budget for next year amounts about 8.379 quadrillion rials (about $293 billion).

Umid Niayesh is Trend Agency's staff journalist, follow him on Twitter: @UmidNiayesh

Edited by CN

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