The Iranian government is grappling with a steady slump in oil prices and President Hassan Rouhani is hard pressed to balance the sheet.
According to new official figures, Iran’s crude oil prices skidded to around $50 per barrel over the two months leading to January. That was 30% down from their value in October, the statistics released by the Central Bank of Iran show.
The government’s revenues from the sale of oil and gas in the period declined to $6 billion from $9 billion.
Oil and gas revenues in the second quarter of the Iranian year totaled $15 billion, down from $22 billion in the first four months. Iran earned $5.5 billion per month from oil sales in the first fiscal quarter when prices hovered above $100 per barrel.
Government’s revenues from the sale of crude oil, oil products, natural gas and gas condensates added up to $33.6 billion in the first six months of the Iranian year.
President Rouhani saw earnings from those sales run up to $34.4 billion in the six months after taking office in June 2013.
According to the Central Bank of Iran, the Rouhani administration has earned as much as $83 billion from oil and gas sales so far.
With those proceeds growing smaller, the government is facing a balancing act to keep the state running.
The state finances are already under pressure from a multi-billion dollar subsidy program, under which the government is obliged to pay out a monthly stipend to every Iranian.
The program has few favorites among the Rouhani administration, with calls to cut the sum for the rich. But, the government has flip-flopped on that.
Government spokesman Mohammad Baqer Nobakht indicated that the government might be ultimately forced to implement the plan. The government, he said, pays out about $15 billion (420 trillion rials) per month in subsidies.
But the buck does not stop here and government’s policies are also to blame. President Rouhani called for monetary discipline, including liquidity regulation, when he took up office.
However, new figures show government’s debt to banks grew 26.7% in the first nine months to $35 billion (960 trillion rials).
Experts say the ballooning debt to the Central Bank and the government’s debt to banks is seriously threatening the banking system.
One strong point is related to the foreign exchange reserves of the Iranian banks which rose 19% year-to-year to more than $79 billion (2,150 trillion rials) in December.
Latest figures by the Central Bank of Iran also showed liquidity rising by nearly 15% to about $250 billion within a period of nine months.
Mohammad Qoli Yusefi, professor of economics at University of Allameh Tabatabai, said the government’s policies are inflationary.
“Due to Iran’s reliance on oil revenues and failure to properly manage earnings and expenditures, the Rouhani administration has not succeeded yet to implement monetary discipline,” he told the Jahan-e-Sanat daily.