Tyranny of numbers

More on Iran’s proposed budget for 2015/2016: a peak into Rouhani’s priorities

Posted in Education, General by Djavad on December 18, 2014

This is a short followup note to my previous post which compared the proposed budget for next year with the budget bill for the current one.  I was looking for a table that included the numbers for basic expenditure items that would reveal the budget priorities for next year and could not find one in English, so I decided to post one here.  Then I found an excuse to grumble about lack of attention to long term development priorities, such as education, which have been eclipsed by all the talk about inflation as enemy number one and the poor climate for business as the enemy number two.   

Since Rouhani’s first budget was mostly fixing the broken macroeconomy, not much could be read into it by way of his vision for the future.  From what I can see, not much can be learnt from this budget either.  That does not mean that there is not a more refined plan somewhere else; it just means that the budget does not say much about long term priorities.  For what they are worth, here are the public expenditure priorities (if you cannot see the table, click here):

budget 1393 1394
Note:
 I have used the budget bill’s proposed exchange rate of 28500 rials per USD to convert both years’ rials into dollars.
Source: Budget Bills for 1393 and 1394, Tables 6.

To get a sense of how large the overall budget is consider the fact that Iran’s GDP is about $560 billion (using the same exchange rate as in the table and my estimate of next year’s GDP), so government spending is about 16% of the GDP, which is lower than what it has been in the recent past.

The overall budget structures for the two years are very similar, which is to be expected if you know how these budgets are made — you take last year’s budget and tweak it.  Nevertheless there are two noteworthy changes: in health, which receives the largest increase in share (15.0%, up from 12.4%), and in defense, which is up from 9.8% to 11.2%.

The savings come mainly from social protection, whose share is down to 19.7% from 22.3%.  I wonder if this is a reallocation of funds for the same purpose from social protection to health.  When Rouhani announced universal health insurance in his first year, I wondered where the money would come from.  Here is one possibility, but readers may know more.  There is also savings from the large category labeled “other”, about which I know nothing.

Education expenditures are unchanged.  Hopefully, this is only in the budget totals and there will be changes in how the education money is spent.  If there is one sector that needs fundamental change to improve productivity in Iran it is education.  The low productivity of public education expenditures is not hidden from anyone.  The fact that unemployment is higher among the educated speaks volumes.  The mushrooming of private schools and private tutoring is also very telling.  The richest (and the brightest?) are abandoning public schools in droves hoping to increase their chances entering the heavily subsidized and superior public universities.  No wonder that with all the talk about free public education, Iran has one of the least opportunity equal education systems in the Middle East (you can read about it in this technical paper of mine).

To end on a positive note, there is a small increase in the allocation to the item listed as “Planning” in my table (listed as “financial services, technical, management and planning” in Table 6 of the Bill).  Perhaps this is associated with the revival of the Management and Planning Organization, which can then address questions like how to spend the public education funds.

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6 Responses

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  1. mr said, on November 13, 2015 at 6:22 am

    I think the statistic is not true. Iran’s expenditure on education has been always less than 1%. The plan is to make it till 3%. How come have you reached to this statistics? Just read news here:

    http://www.sccr.ir/Pages/?current=news&gid=1&Sel=716310

    Since Iranian government statistics are mostly with an optimistic view, it would be hard to believe that the government is spending on education 30 times more than what you presented.

    • Djavad said, on November 13, 2015 at 11:08 am

      Most countries spend between 4-6% of their GDP on public education. Iran’s is in the lower part of that range. The numbers I report here are for the proposed budget, not the actual. Still, 15% of government expenditures for education is realistic and low compared to other countries: it is about 3% of the GDP (since the budget is about20% of the GDP). I think you are confusing share of GDP with share of government budget.

      From: Tyranny of numbers <comment-reply@wordpress.com> Reply-To: “comment+2i1eh_sdauhxti6cnoffv9q4a@comment.wordpress.com” <comment+2i1eh_sdauhxti6cnoffv9q4a@comment.wordpress.com> Date: Friday, November 13, 2015 at 6:22 AM To: Djavad Salehi-Isfahani <salehi@vt.edu> Subject: [Tyranny of numbers] Comment: “More on Iran’s proposed budget for 2015/2016: a peak into Rouhani’s priorities”

  2. Thomas said, on November 9, 2015 at 7:00 am

    I would like to ask you about the overall budget – which I have never understood (being no economist): the figures for Iranian budget are often much higher because they include “Overall or ‘Total’ Government Budget; which includes state-owned companies”. What is meant by this? Is it capital value of state-owned companies (if so, why is it calculated yearly)? Or this shows incomes and expenditure of state-owned companies, meaning that the companies use their financial means for their own development and their profit does not flow to the proper state budget? Thank you for clarification.

    • Djavad said, on November 9, 2015 at 10:02 am

      The total budget is composed of the general budget (what we usually mean by gov budget) and that of public enterprises, with 30-70 shares. The latter is the income=expenditures of these enterprises. They often run a deficit (losses) and obtain subsidies from the government, which are not terribly transparent.

  3. Ardy said, on March 4, 2015 at 6:07 pm

    Prof. Salehi,

    Would you care to comment on;
    http://www.al-monitor.com/pulse/originals/2015/03/iran-bank-deposits-inflation-sanctions.html

    And general state of private as well as nationals banks? Thank you.

  4. William said, on February 22, 2015 at 2:56 pm

    Interesting to see a sizeable increase in science & technology – you’d think investing in tech would be a gateway to some of these other variables such as commerce, communication and even defense.


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