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Iran sets $44bn annual budget

TEHRAN: Iran's parliament has approved a state budget of more than $44 billion to launch President Mohammad Khatami's five-year economic recovery plan, newspapers reported on Sunday.

The 360 trillion rial budget for the Iranian year starting on March 20 has been drafted to meet the goals of the ambitious plan, which forecasts steep economic growth and more investment to help create 765,000 jobs a year.

The newspapers said deputies approved the budget, worth $44.2 billion at the rial's official floating exchange rate of 8,150 rials to the dollar, late on Saturday. Budget items for strategic and essential goods are calculated at an official rate of 1,750 rials per dollar.

As in previous years, the budget was officially balanced, although officials say the government has often had to borrow from state banks to cover deficits.

The government's share of the budget is about 127 trillion rials, with the rest going to state industry and banks, which have increasingly been forced to generate their own revenues.

The rial value of the budget shows an increase of about 30 percent on the approved budget of the current Iranian year. Annual inflation is officially about 22 percent.

The budget sets a 10 percent limit on government-set price rises for fuel, electricity and gas.

Parliament had rejected a government proposal to raise petrol prices by 28 percent and other fuels and power by 20 percent to curb crippling state subsidies and cut wasteful use.

Iran has some of the world's lowest fuel prices, with a litre of petrol currently at 350 rials (about four U.S. cents).

The outgoing conservative-led assembly's limiting of fuel price rises was a blow to the gradual market reforms proposed by Khatami's government. A parliament more supportive of Khatami was elected last month, but it was not clear if it would be able to reverse key parts of the approved budget.

The Guardian Council, which vets parliamentary decisions and is also led by conservatives, had earlier blocked privatisations proposed by the government to boost growth and create jobs.

MPs said during the debate that the budget forecast $11.5 billion in income from crude oil exports - Iran's main source of hard cash.

The crude oil price used in calculating the budget was not immediately available. Officials had earlier said they expected an average income of $18 per barrel in the budget year, but that budget calculations were based on a more conservative forecast.

Some deputies had criticised the budget as inflationary and too dependent on oil revenue.

The budget allocated up to $6.9 million to fight alleged plots by Iran's arch-enemy - the United States.

The budget bill must be approved by the Guardian Council before it becomes law.-Reuters