The Budget Bill for the Year 2025 (2025/2026) is the first budget bill of the new government and parliament and, in a way, represents the second-year budget implementation of the Seventh Development Plan. The law of the Seventh Development Plan will influence both the macro figures and the clauses of the 2025 budget bill, as well as the prioritization in the detailed budget. Therefore, it is necessary that these enactments be considered during both stages of budget review. The most significant action taken by the government in the 2025 budget bill is the addition of the following three main items to the macro budget figures, which had previously been included only in the clauses but were not calculated in the macro figures of the budget:

Resources and expenditures related to the targeting of subsidies;
Oil deliveries to the armed forces aimed at strengthening defense capabilities;
Repayment of Social Security Organization’s debts through set-off and repayment of debts to banks via securitization of their debts.

In other words, the scope of public resources and expenditures in the 2025 budget bill has undergone relatively extensive changes compared to previous years, making comparisons with the 2024 budget law and the government’s financial performance challenging. Accordingly, adjustments must be made to the figures to enable comparison. With these necessary adjustments, the budget ceiling for 2025 will have increased by approximately 43% compared to the 2024 budget law. Furthermore, after these adjustments, revenues will have grown by 42%, capital asset disposals by 41%, and financial asset disposals by about 97%. Regarding resources, tax revenues have increased by 39% compared to the 2024 budget law. Article 26 of the Seventh Development Plan law states that by the end of the plan’s years, the ratio of tax revenues to GDP must reach 10%. To meet this target, the tax-to-GDP ratio in 2025 should be set at 6.3%; however, according to the figures recorded in the budget bill, this ratio stands at 5.5%. In other words, the annual proportional step to achieve the tax targets of the Seventh Development Plan is not foreseen in the 2025 budget bill. The 2025 budget bill anticipates total revenues of $35 billion from cash exports of crude oil, gas condensates, and net natural gas exports, of which 37.5% is the government’s share. Additionally, the government is borrowing from the National Development Fund’s resources in the 2025 budget bill, such that out of the fund’s 48% share, 28 percentage points represent government borrowing, while the remaining 20 percentage points will be deposited back into the fund. A notable point regarding the 2025 budget bill, compared to previous years, is that the withdrawal from the fund’s share and the planning for its resources are done within the budget bill and during the budget preparation phase. In contrast, in some previous years, these withdrawals occurred throughout the year without parliamentary oversight on their uses, reducing transparency. Therefore, including the borrowing figure from the National Development Fund in the 2025 budget bill is a positive step toward greater transparency and policy stability. Specifically, the high dependency of budget resources on oil exports, especially amid potential external shocks, remains a fundamental weakness of the budget. On the expenditure side, current expenditures have increased by about 55% compared to the 2024 budget, constituting 68% of total expenditures. With a 42% increase in revenues and a 55% increase in current expenditures, the gap between revenues and current expenditures has widened compared to the previous year, reaching 1,805 trillion rials. One notable aspect of the 2025 budget bill is the increased operational deficit. However, the 2025 budget bill is not easily comparable to previous years in this respect, as significant items of current expenditures, which were previously outside the scope of current budget appropriations and not reflected in budget documents, are now included in the macro figures. By aggregating and including off-budget expenditures, current appropriations have seen considerable growth. It is worth noting that if the approved figures for 2024 were updated similarly to the 2025 bill, current expenditure growth would still be significant. Overall, to have a consistent comparison of the operational deficit, the 2025 budget bill figures have been adjusted based on the budget scope of 2024. With these adjustments, the ratio of the operational deficit to the ceiling of general budget resources is 21%, which is higher than the approved and forecast figures for 2024. The main challenge for the government’s budget is the unfunded (hidden) deficit, meaning the portion of the gap between revenues and expenditures that, after considering all mobilized resources including bond issuance, cannot realistically be financed, causing the government to be unable to cover part of its expenditures by the end of 2025.  According to expert estimates based on the proposed revenue realizations, the probable unfunded deficit in the 2025 budget bill is approximately 320 trillion rials. From a macroeconomic perspective, the budget is presented to the Islamic Consultative Assembly under conditions where, according to the Central Bank, the country’s economic growth has consistently exceeded 4.5% over the past three years. However, the Central Bank reports that growth in spring 2024 was about 3.2%, and non-oil growth was 2.5%, indicating a 2.5 percentage point decrease in economic growth in spring compared to the same period last year. Based on the Parliamentary Research Center’s estimates, if the 2025 budget bill is fully realized—especially considering the projected growth in investment and oil exports—an increase of about 0.8% in economic growth with oil is expected. Regarding inflation, it is estimated that the decisions made in the 2025 budget bill will reduce the inflation decline, based on trends, by about 1.2 percentage points. Also, if the 2025 budget bill is fully implemented, no change is expected in poverty rates or the Gini coefficient. In summary, the 2025 budget bill, compared to previous budget laws, shows significant progress in key areas such as integration and realism of resources and expenditures, gradual advancement of reforms without shock therapy, growth of investment credits, and attention to government commitments and debts. However, it has shown less success in addressing issues like reducing the operational deficit, moving towards reducing government ownership, securing necessary resources for improving employee livelihoods, avoiding non-budgetary provisions within the budget bill, increasing the share of tax revenues, reducing budget dependence on oil and intergenerational resources, and implementing some provisions of the Seventh Development Plan. These issues need to be pursued to the extent possible within the capacities of budget laws during the review of the 2025 budget bill and through other corrective actions aimed at the country’s structural challenges, either through approval or implementation of permanent laws.