Iran needs to boost agricultural exports to compensate for oil revenues' cut

Business Materials 20 December 2014 10:16 (UTC +04:00)

Tehran, Iran, Dec. 20
By Milad Fashtami - Trend:

An Iranian MP says the country needs to increase its agricultural products' exports to compensate for a considerable decrease in oil revenues.

Seyyed Mehdi Mousavinejad, a member of the Energy Commission of Iranian Parliament, told Trend Agency on Dec. 20 that the falling trend of oil prices in the global markets will most likely continue until the second half of the next Iranian calendar year (to start on March 21, 2015).

Oil price has faced a sharp fall in the past few months reaching below $60, from $110 in mid-2014. According to Bloomberg, Futures fell as much as 2.4 percent after sliding below $54 a barrel on Dec. 16 for the first time since May 2009.

Falling global oil prices forced Iran's government to decrease the oil price figure in the proposed budget bill for the next Iranian calendar year to $72 per barrel from the current figure of $100.

However, Mousavinejad says the $72 per barrel is not realistic.

"It's better to lower the price of oil in the budget bill to $55-60," he said.

According to the lawmaker, the country needs to find some alternative income source to decrease its reliance on oil revenues.

"If we allocate enough funds to agricultural projects, the country's output will increase. Therefore, the agricultural exports will also boost," Mousavinejad added.

He went on to note that the country can always find new markets for its agricultural products.

Iran is expected to face severe budget deficit in the current Iranian calendar year (to end March 20, 2015).

The country decided to sell its crude oil to Asia in November at the biggest discount in almost six years. The decision was made after Saudi Arabia cut prices for all grades and to all regions for November. Qatar and Iraq decreased their prices as well.

Iran's current year budget envisages the price of $100 per barrel of oil.

Based on Iran's budget law, the country is supposed to export 1.4 million barrels of oil (including gas condensate) per day.

Reports suggest that if the current tendency continues, the total budget deficit may soar above $2.5 billion.

The Iranian President Hassan Rouhani also predicted that Iran's total oil revenues will be 30 percent less than expected.

Experts believe that due to the continuing fall of oil prices in global markets, a budget deficit in the next calendar year is also inevitable.