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HomeWorldHassan Rouhani's 'budget of resistance' for Iran is mostly a bluff

Hassan Rouhani’s ‘budget of resistance’ for Iran is mostly a bluff

A weakening currency would make a mockery of Rouhani’s plan to raise revenue — he expects tax receipts to rise by 13% — while increasing government salaries by 15%.

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There’s a sprinkling of wishful thinking in all budget announcements. Governments always want to foster a sense of hope among their citizens, never more so than during hard times. But the budget unveiled over the weekend by Iranian President Hassan Rouhani seems to have been created out of whole cloth.

For starters, the official exchange rate it uses, which suggests that spending will add up to about $115 billion, is pure fiction. In real market terms, the budget will be closer to $37 billion, and that’s including $5 billion in promised loans from Russia that haven’t yet been finalized. It could shrink even further as the rial responds to economic trends. A weakening currency would make a mockery of Rouhani’s plan to raise revenue — he expects tax receipts to rise by 13% — while increasing government salaries by 15%.

The regime managed to protect the rial through much of 2019, after a calamitous 2018, but it will struggle to prop it up for much longer. The International Monetary Fund expects Iran’s gross domestic product to shrink by at least 9.5% this year — only Libya and Venezuela will do worse. The overall inflation rate was 47.2% for the 12 months to October. Oil exports, the country’s largest source of foreign currency, are down by 70%. Rouhani’s assurances that other sectors of the economy will compensate for this have the credibility of a fairy tale.

The president acknowledged that the dire straits are, to a great extent, the product of American economic sanctions, although his own mismanagement and widespread corruption are significant contributors. Attempting to make a virtue of his desperation, Rouhani described his effort as a “budget of resistance.” Iranians facing the prospect of higher taxes and energy bills are unlikely to be impressed by a branding exercise.

If they don’t come out into the streets to protest the new levies — as they did in more than 100 cities last month, when Rouhani suddenly increased fuel prices — it will only be because many of those who’d be at the vanguard of any demonstrations have either been murdered or arrested. Human-rights agencies reckon more than 200 have been killed and 7,000 jailed; the U.S. government has suggested the death toll may exceed 1,000.

But the resentments against the regime are widespread and deep, and they aren’t limited to economic grievances. The protesters were demanding greater political freedoms and the ouster of Rouhani and his boss, Supreme Leader Ali Khamenei. The next expression of dissatisfaction may only be weeks away.

One imminent inflection point is Feb. 21, the date for nationwide parliamentary elections. The registration of candidates began a few days before the budget announcement, and many analysts expect hardliners to gain seats at the expense of the reformers who back Rouhani.

But Khamenei may have a bigger anxiety: Voters in large numbers may simply choose to stay home. The Supreme Leader likes to characterize Iran’s elections — regardless of who actually wins — as underpinning the Islamic Republic’s legitimacy, and, by extension, his own. A low turnout would damage that legitimacy as much as the protests.

The portents are not good. In the most recent elections, for Tehran’s city council earlier this year, turnout was less than 10%. The regime is not above ballot-stuffing on a large scale, but it is telling that the authorities have lowered the minimum voting threshold in the parliamentary election to 20% from 25%.

There’s very little in Rouhani’s budget to give voters any reason to show up.-Bloomberg

Also read: How the West can protect Iran’s brave protesters


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