TEHRAN: President
Hassan Rouhani yesterday unveiled Iran's first annual budget since the return
of US sanctions, saying it had been adjusted to take account of Washington's
"cruel" measures. The president announced a 20 percent increase in
public sector wages in a sign of the economic challenges the Islamic republic
has faced since the United States pulled out of the 2015 nuclear deal earlier
this year. The speech gave only a few general points of the budget -- which
will now be scrutinized and voted on by parliament -- but acknowledged the
pressure Iran was under.

"Last year
we faced some problems," Rouhani told parliament in a televised speech,
referring to the widespread protests that hit the country almost exactly a year
ago, sparked by anger over economic and political conditions. "Those
events caused the Americans to change their position regarding the Islamic
republic and the nuclear deal," he said. "The real objective of the
US in all of this conspiracy and sanction and pressure... is to bring the
powerful Islamic republic of Iran to its knees," he said, vowing that the
US "will definitely be defeated." The renewed US sanctions include an
embargo on Iran's crucial oil sector.

The new budget
did not say how many barrels of oil Iran hopes to sell in the next financial
year, which starts in late March, but analysts believe it will be considerably
less than the approximately 2.5 million it sold per day prior to Trump's
withdrawal.  The US granted waivers to
eight key buyers of Iranian oil -- including China, India and Turkey -- though
this has been a double-edged sword for Iran since it also helped push down the
global price.

Forex
'practically zero'

Rouhani came to
power in 2013 representing the more moderate side of Iran's ruling elite,
hoping a compromise on the country's nuclear program would reduce tensions with
the West and allow foreign investment to boost the stunted private sector. The
return of sanctions has ended that hope, and forced Rouhani more towards the
self-sufficient "resistance economy" preferred by supreme leader
Ayatollah Ali Khamenei.

Concern over the
economy pushed many Iranians to secure their savings in dollars and gold,
triggering a run on the Iranian rial, which has lost around half its value
since Trump announced the pullout. "At one point early this year our
foreign exchange cash reserve was practically zero, forcing the government to
take hard decisions to save the country," Rouhani told parliament. The government
has pressured exporters to return their dollars to Iran, and Rouhani said they
would lose tax incentives if they failed to repatriate their cash.

The central bank
has used the returning dollars to shore up the collapsing rial, which has
recovered to around 110,000 per dollar on unofficial exchanges. The rial's fall
drove up prices across the board, with food and drink costs up 60 percent in
the year to November according to the central bank. The judiciary launched a
fierce crackdown on currency speculators, dubbed "economic
disruptors" that has seen dozens of traders put on trial and at least
three businessmen executed.

The so-called
"sultan of coins", Vahid Mazloomin, was hanged in October after being
found guilty of amassing two tons of gold coins. But sanctions and fraud are
only part of the story in an economy with many long-standing problems.  Its banking sector is riddled with bad loans,
while many key industries from oil and gas to construction are dominated by
semi-state groups with opaque links to the government and military. The budget
was delayed several times in recent weeks, with reports that Khamenei had
demanded unspecified changes to the final document.  - AFP