Announcement of the 2014 Budget Bill Circular / Water and Livelihoods as a Priority

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According to Ashura News, citing IRNA, the circular for the preparation and preparation of the budget bill was signed by the President today - November 14 - and communicated to the executive agencies. In this circular, the 14th head of government emphasized six axes as the government's approach and macroeconomic policies for the coming year.

These policies, which will be the basis for the compilation of the budget bill for the coming year, include strengthening support policies for ensuring minimum livelihoods, balance and discipline in the budget and tax revenues, adjusting the energy and water deficit, financial sustainability, the government's management of the budget deficit, government debts and obligations, and strengthening passive defense and resilience.

The text of this circular is as follows:

Circular for the preparation and preparation of the 1405 national budget bill

The 1405 national budget bill shall be formulated within the framework of the upstream documents and laws and general policies of the system, with an emphasis on the implementation of applicable provisions and policies of the Seventh Progress Plan Law, land planning documents, and the National Program "Improving Growth: Stability, Progress, and Justice" with a realistic approach and taking into account the economic and social conditions of the country.

All executive agencies subject to clauses (p) and (d) of Article (1) of the Seventh Progress Plan Law are obliged to take necessary and effective action in carrying out their duties in formulating the bill within the framework of the approaches, axes, and policies of the circular and the rules and guidelines notified in its annex.

A - National and International Economic Conditions

The government budget has three important economic tasks, including improving economic growth, helping to stabilize the economy, and improving income distribution. Functionally, it must also be able to establish financial discipline. It must allocate resources to the country's priorities and provide the basis for the efficient and effective use of resources allocated to priorities. In order to prepare and draft the budget bill, it is necessary to pay attention to the status of the following economic variables.

Global Economic Conditions and the Oil Market

Global economic growth in 2024 decreased to about 2.9 percent due to stricter monetary policies, and economic growth of 3 percent in 2025 and 3.1 percent for 2026 is also predicted.

Increasing trade tariffs, government budget deficits, political, military, and geopolitical tensions, and heterogeneity in access to new technologies such as artificial intelligence are among the main risks to the economic growth of countries. The price of Brent crude oil is expected to average around $66-67 per barrel in 2025 and is expected to decrease to around $58-60 in 2026, which will be taken into account in planning resources from the country's crude oil exports, along with the possibility of increasing sanctions restrictions.

Gross Domestic Product and its Growth Fluctuations

Production growth is not only an important indicator for understanding the country's economic developments, but also plays an important role in providing public revenue in the form of collecting various taxes. Economic growth grew by an average of about 3.7 percent annually between 1400 and 1402. Since late 1403, the acceleration of economic growth has decreased to 3 percent, and initial estimates indicate that the Iranian economy will continue to grow less than expected in 1404.

The lack of sustainable energy supply for industries and the shortage of gas and electricity are among the main factors slowing down the growth of the industrial sector, and drought in recent years is considered the reason for the decline in agricultural growth.

Among the major challenges facing the Iranian economy in the last decade has been insufficient investment to create new capacities to increase sustainable and stable economic growth, so that the average net capital stock of the country at constant prices has grown by only 70 percent annually over the past decade from 1393 to 1402.

The real value of the performance of the budget's capital asset acquisition credits has also not been satisfactory over the past decade due to the limitations of the budget's revenue sources from oil revenues, which has clearly shown its consequences in the emergence of energy and water imbalances. It is worth noting that, given the strong need of the upstream oil and gas sector for investment and the special importance of this sector in financing the budget, the business environment is not conducive to private sector investment, and therefore one of the main strategies of the government for the rest of this year, in accordance with the slogan of the year under the title of Investment for Production and 1405, is to quickly and effectively improve the business environment.

Gradual increase in the general level of prices

Given the persistence of the main factors causing inflation, controlling the growth of liquidity and inflation requires proper management of the government budget deficit and reducing the imbalance of the banking system. In addition, supporting the livelihood and food security of low-income households and providing intermediary inputs and necessary financial resources for existing economic units are among the government's priorities in the 1405 budget.

One of the important economic balances is foreign exchange resources and expenditures in the form of the balance of payments. In the first half of 1404, non-oil exports and imports were about 26 and 28.4 billion dollars, respectively, which decreased by 0.01 and 15.4 percent compared to the same period last year. The non-oil trade balance at the end of the first six months of 1404 was about minus 24 billion dollars.

Among the factors affecting the decline in non-oil exports are the shortage of gas and electricity and the decline in the level of activity of producing and exporting economic units, which has led to a decrease in export revenues. It is worth noting that foreign exchange expenditures such as gasoline and diesel imports, as well as the allocation of preferential foreign exchange to basic goods, practically take up the government's entire share of resources from oil and gas exports. In terms of economic logic, government interventions in the market for these types of goods do not meet the government's justice-seeking goals with the slogan of supporting vulnerable groups and public livelihoods, and therefore, gradual reform of this approach will be one of the focuses of the 1405 budget bill.

The consequences of economic policies are ultimately reflected in changes in per capita income. Per capita income has not grown much in recent years. This, along with the increase in the general level of prices, has reduced the purchasing power of households in the lower and middle deciles. Therefore, controlling inflation and improving the livelihoods of households, including the payment of targeted cash and non-cash subsidies in the form of support policies, with priority given to the livelihoods and food security of the aforementioned households, will be one of the government's goals.

B - Principles Governing the 1405 Budget Bill

In addition to emphasizing the pursuit of active and flexible diplomacy to solve international problems facing the country, the principles governing the 1405 Budget Bill include:

- Ensuring the livelihood of the general public and supporting the disadvantaged

Strengthening the country's defense and security capabilities

Increasing the efficiency of public services by adopting a performance-based payment approach and strengthening decentralization

Providing the energy and water needed by the people and economic units to continue production and economic growth, supporting the knowledge-based economy and science and technology

C - Macro-approaches and policies of the 1405 Budget Bill

Regarding the developments in the national economy and based on the tasks and orders of the higher authorities and government policies, the macro-approaches and policies of the budget that should be considered by the executive bodies in preparing the 1405 Budget Bill are announced as follows:

1- Strengthening support policies to provide a minimum livelihood and food security for citizens:

The government believes in providing livelihoods for all members of society. Improving the efficiency of this policy through accurate identification of the economic status of households and the level of support they receive The government and redesigning the way support is provided to ensure that it reaches the target community is one of the main axes of the 1405 budget bill.

2- Balance and discipline in the budget and tax revenues

By regulating budget expenditures, especially unavoidable expenditures, and including real figures for resources and expenditures at the time of drafting the 1405 budget bill, the government will manage the ceiling of its obligations and reduce the imbalance of resources and expenditures.

In order to increase transparency and make revenues realistic in the 1405 budget bill, the entire country will avoid including general and general revenue lines without specifying the revenue collection agency and revenue projections, especially with common titles such as resources from the sale of government buildings and facilities, etc. Executive agencies are required to refrain from predicting any uncertain resources that are backed by definite commitments or expenditures.

It is expected that by making the tax system smarter and fully implementing the law on store terminals and the taxpayer system and operationalizing the capital gains tax base, especially on speculative behaviors in the new law, reviewing procedures and processes in order to collect taxes and government fees in a timely and rapid manner in order to prevent their real value from decreasing due to inflation, as well as determining the exchange rate as the basis for determining customs value, reviewing the mechanism for collecting customs revenues and systematically optimizing the goods clearance process, optimizing processes and systems in order to reduce underdeclaration in exports and correcting customs duty rates and commercial profits, the share of government tax revenues will increase.

The government's overall strategy is to reduce budget lines with the aim of reducing dispersion in cost centers across the three branches. Also, in the performance contracts section, the legal frameworks required to enable allocation and payment based on performance contracts with the implementing unit in selected service and product provider areas will be implemented. In selected implementing units, financial and managerial authority in the field of human resource management, revenue generation, and optimal use of assets and property will be granted to the manager of the implementing unit, and a performance accountability and management system based on results and services provided will be established. The agencies covered by this section are required to standardize the services provided to the final beneficiaries and propose a list of services to the organization in a way that allows for the allocation of credit based on the amount and quality of services provided.

Also, in line with the establishment of a results-oriented approach and accountability in the budgeting system, all executive agencies with a budget row in Table 7 are required to propose annual executive programs, including performance evaluation indicators for executive programs and services of executive agencies, within the framework of Appendix No. 4 of the Budget Circular, to the policy-making agency.

The policy-making body is required to present a three-year integrated strategic plan for itself and its subordinate bodies, including the target setting of program performance indicators for the next three years, within the framework of Appendix No. 4 of the circular.

Using up-to-date standards in preparing the budget bill will lead to the improvement and updating of the budgeting system and increasing the transparency and monitoring of the performance of programs and executive bodies. Identification in the budget writing of the 1405 budget bill will be carried out in compliance with the standards in accordance with the laws and regulations of the upper echelons in order to be collected and improve quality. Identification of the bill is necessary based on Subsection (5) of Paragraph (9) of the General Policies of the Legislative System Promulgated by the Supreme Leader and Article (13) of the Seventh Progress Program Law. This identification is derived from the Classification of Government Functions (COFOG). It includes a classification based on functions with the socio-economic goals of the government. This approach will provide a fundamental contribution to budgeting based on the performance of the bodies and prevent waste of public resources.

3- Adjusting the energy and water balance

Government intervention in the energy market in Iran lacks economic logic in the long term. High energy intensity (low energy efficiency) is the result of political and non-technical views and approaches to the energy issue in Iran, which is considered undesirable.

The government’s priority in infrastructure projects, especially oil and gas, is the strict implementation of Article (15) of the Seventh Development Plan Law. The necessity of defining energy extraction and exploitation plans and increasing the production of hydrocarbon resources will, in addition to increasing government revenues, strengthen upstream energy companies that will gain the ability to export technical engineering services in the long term. In the issue of water, due to the country’s inherent climatic conditions and water shortage, improving water governance and more effective exploitation of existing capacities is more necessary than ever and is among the priorities of the 1405 budget.

Accordingly, given the urgency of adjusting the energy and water imbalance, water and wastewater projects focusing on cities with water stress and energy sector projects, along with projects that lead the way to simply removing bottlenecks connected to international corridors in line with the regional orientations of the Seventh Plan and the Master Plan for Land Management and Sea-Based Development, which will be put into operation in 1405, the priority for allocating credits for the acquisition of capital assets will be.

4- Implementation of the provisions of the Seventh Progress Plan Law in 1405

Executive agencies are required to submit the budget for 1405 to the organization in accordance with the operational plan subject to paragraph (b) of Article (13) of the Seventh Plan Law, taking into account the implementation of paragraphs (a) and (b) of Article (105) of the Seventh Plan Law. Therefore, in compiling the annual operational plan for implementing the provisions of the Seventh Plan Law based on structural reform, the elimination or integration of unnecessary and parallel activities and the expected achievements in 1405 should be taken into account, and if a provision in the plan directly has a financial burden on the government, they should report it in the proposed operational plan.

5- Financial sustainability, government, budget deficit management, government debts and obligations

Managing and optimizing the mix of current and development costs requires comprehensive cooperation of executive agencies in controlling cost centers. Reviewing budget lines related to institutions and organizations that lack the necessary effectiveness or unnecessary and non-priority services, except for employee salaries and wages. Requiring agencies to optimize their organizations with the aim of strengthening and employing expert jobs. Rearranging and eliminating unnecessary managerial jobs. Applying teleworking methods in agencies that do not provide direct services to the people, as determined by the government, with the aim of reviewing and improving the efficiency of cost credits, will be among the methods for optimizing government spending in 1405.

In order to manage the government's obligations and to ensure the existence of sustainable financial resources for the implementation of the approvals and decisions of various decision-making authorities, firstly, the title and financial burden of the decisions must be clearly stated in the budget law, and secondly, during the year 1405, the decision-making authorities are required to provide the exact financial burden for the years of implementation of the commitment and obtain a unique ID from the National Planning and Budget Organization before announcing the approval. It is important to note that according to paragraph (a) of Article (24) of the Program Law, the National Planning and Budget Organization will determine the permissible ceiling for issuing guarantees and obligations issued to the government in the budget bill.

Regarding capital asset acquisition plans, strengthening the public-private partnership system, creating new financing capacities such as factoring, paragraph 2, paragraph b, Article 10 of the Program Law, and establishing and strengthening the position of cooperatives, production self-governments, and creating public project funds. The main government strategies to strengthen financing are to implement part of the acquisition plans and achieve the goals of the Seventh Progress Plan.

6- Strengthening passive defense and resilience

The aggression of the Zionist regime and the United States of America against the country, along with the occurrence of some natural disasters in recent years, have clearly demonstrated the importance and necessity of passive defense and economic resilience. Increasing deterrence and reducing vulnerability to enemy threats, strengthening the stability and security of various networks, communications, financial information and databases, energy and water supply facilities, and ensuring the permanent and sustainable operation of sensitive centers such as important water and electricity supply sources and facilities, hospitals, bakeries, etc. are among the government's major policies in the 1405 budget bill.

Relevant executive agencies are required to plan and anticipate passive defense programs to reduce vulnerability and create support systems for the main systems in the 1405 budget bill.

D- Executive axes and policies of the 1405 budget bill

Given the approaches and macro policies of the budget bill, the following executive axes and policies should be considered in the process of drafting the bill and the proposed operational plans of the agencies:

- Implementing performance-based budgeting in accordance with paragraph (a) of Article (18) of the Seventh Plan Law with the aim of improving efficiency and effectiveness in allocating resources and changing the mechanism of monitoring the executive agencies, along with capacity building and providing the necessary training to implement this method in the agencies providing the selected service and product

- Identifying, organizing, and transferring surplus government immovable property, especially low-yielding and costly properties of the executive agencies within the framework of Article (16) of the Seventh Plan Law, and preparing standards and guidelines regarding the space and property required by the agencies, removing existing obstacles, and

Decentralizing and delegating authority to the provinces with a policy-making approach and focused supervision on the manner of budget implementation and delegating authority to the regions, and establishing a new revenue-expenditure system for the provinces within the framework of Article 27 of the Seventh Plan Law;

- Establishing integrated management of water resources in the form of watersheds, along with promoting good governance and optimal management of water consumption, protecting and preserving natural resources and the environment, and enhancing the country's ecological resilience;

- Gradual elimination of energy imbalances with a simultaneous approach to increasing production and supply and managing its consumption using non-price and price mechanisms (commensurate with medium-term inflation and continuous energy supply for existing economic and industrial units;

- Increasing the share of knowledge-based companies in creating added value, especially in the field of communications and information technology, and developing the necessary infrastructure by attracting private sector participation and investment;

- Improving and renovating existing economic and industrial units by prioritizing financial and non-financial insurance facilities with the aim of maintaining the country's existing industrial capacity and providing basic and essential goods and services within the framework of paragraph (d) of Article (48) of the Seventh Plan Law, using the capacities of the Gold and Foreign Exchange Exchange Center to support exporters of non-oil goods and services and reducing the country's foreign exchange imbalance

- Supporting retirees and improving their basic and supplementary health insurance and livelihood services

- Continuing to support the livelihoods of the lower classes of society through cash subsidies or electronic goods with a market approach to social benefits

- Stabilizing financing and granting direct and indirect subsidies Direct

- Implementing a program to supply basic goods from domestic production and imports in line with market conditions and domestic needs of the country and reforming support policies in the field of basic goods and the wheat, flour, bread and medicine chain;

- Attracting public participation, especially in education, focusing on educational justice, a combined approach to educational space and quality (education combined with transparency and accountability);

- Implementing a program to improve productivity in various economic sectors through technology units of private and knowledge-based companies within the framework of the provisions of Note (2) of Article (3) of the Seventh Plan Law and establishing a public payment system commensurate with productivity and impact on society;

- Reviewing and prioritizing expenditure, including unavoidable expenditure, in order to improve efficiency and reduce costs and use appropriate tools to continuously improve processes and improve the executive management system;

- Reviewing the budget of unnecessary and parallel institutions and programs by eliminating or merging them in order to reduce costs and transfer the released resources to provide for the livelihood of vulnerable and deprived classes and energy and water supply infrastructure;

- Increasing the tax-to-production ratio GDP and promoting tax justice and efficiency through smart tax system and transparency of government tax expenditures;

- Prohibiting the start of new projects except in the field of water and energy and prioritizing capital asset acquisition projects of agencies and determining the status of unfinished projects based on the urgency of necessity and economic and social effectiveness and the percentage of progress of projects with the participation of agencies and provinces and attracting the participation of the private and cooperative sectors in financing projects, especially projects effective in the value chain of industrial and economic activities of the country;

- Maximizing the use of Qarz al-Hasaneh resources for marriage and housing of young people and small and subsistence businesses with priority in less-privileged areas within the framework of the provisions of Articles (6), (50), (80) and (81) of the Seventh Plan Law;

- Targeted support for skill development with a view to land planning and provincial planning in order to reduce the unemployment rate of young people, especially academics and specialists, by implementing active labor market programs and increasing the share of the knowledge-based economy;

- Disciplining government commitments and guarantees through launching banking commitments subsystems and cross-agency commitments, designing a mechanism Implementing and developing regulations for issuing guarantee bonds in order to implement Subsection (6) of Clause (b) of Article (10) of the Seventh Plan Law and amending the process of issuing a principled consent license to benefit from the capacity of the facilities of Article (56) of the Law on the Addition of Certain Articles to the Law on the Regulation of Part of Government Financial Regulations (1);

- Monitoring the revenues and expenses of state-owned companies and other companies receiving language assistance in order to improve the productivity of companies and reduce the budget deficit;

- Transferring management or merging state-owned companies through the transfer of management, not ownership, to the private sector and independent supervision and monitoring of the performance of companies after the transfer;

- Smartening the government financial management system and increasing the effectiveness of the budget through direct budget payments to the final beneficiary and reducing money stagnation in supply chains related to government subsidies and credit settlement between supply chain components through budget allocation in the form of step bonds;

- Organizing existing information systems and connecting databases for synergy and preventing parallel work in line with the needs of implementing the registration-based census in 1405 and creating the necessary infrastructure For smartization and e-government, the subject of clauses "A", "B" and "D" of Article (107) of the Seventh Development Plan Law, with emphasis on preventing parallel work in map production, the subject of Article (11) of the Permanent Provisions Law on National Development Plans, and sharing of specialized data necessary for the development of the country's spatial infrastructure (SDI);

- Improving the country's security defense and passive defense capabilities and reducing the vulnerability of vital sectors by using public participation in capacity building to improve the country's security and predict its required financial resources;

- Strengthening the monitoring, evaluation and accountability system at all executive levels and updating the budget classification and identification system in accordance with upstream laws and regulations in order to collect and improve quality;

E - Annexes:

(1) Schedule for preparing and preparing the 1405 budget bill for the whole country (2) Financial regulations governing the preparation of the 1405 budget for the whole country

(3) Instructions for preparing and preparing the budget of executive agencies

(4) Comprehensive instructions for performance-based budgeting within the framework of the annual operational plan (5) Instructions for preparing and preparing the budget of state-owned companies, banks and government-affiliated profit-making institutions (6) Instructions for prioritizing and reviewing cost credits

(7) Instructions for screening capital asset acquisition plans and projects

(8) Instructions for regulating bank facilities and extra-budgetary expenses