Iranian President Mahmoud Ahmadinejad has acknowledged publicly for the first time that declining oil prices are damaging the country's fragile economy and will force his government to make painful spending cuts, state media reported Wednesday.
Just last month he was boasting that even if the price of oil sank to $5 a barrel, Iran's economy would be fine. Now, the Iranian leader said his government has no choice but to trim spending and generous subsidies and raise taxes.
Wednesday's report by the official IRNA news agency quoted Ahmadinejad as saying the government budget for the next year would have to be readjusted to base it on an oil price of around $30 a barrel. Only a month ago, officials in the president's office said they planned to base the budget on $50-$60 a barrel.
"Suppose we plan to base next year's budget on $30 per barrel of oil; we have to leave a major part of our projects behind. But we are obliged to set it on $30-$35 since we do not decide the price of oil on the global market," the news agency quoted the Iranian leader as saying. "Because of the world recession, oil prices will be declining for some time," he was quoted as saying.
Ahmadinejad asserted, however, that his administration had the power to control the damage and that it would continue direct payments to the poor.
"To manage the country in a better way, applying taxes to low-priced energy is the best" solution and would prevent the waste of resources, Ahmadinejad said.
However, Ahmadinejad said Iran's foreign currency reserves are healthy and currently topped $23 billion.