* Budget of $319 bln slows spending growth
* State finances ravaged by sanctions
* Passage of budget an endorsement of Rouhani
By Andrew Torchia
DUBAI, Feb 10 The first state budget proposed by
Iranian President Hassan Rouhani has sailed through parliament,
handing him a political victory as he seeks to build domestic
support for international negotiations on the country's nuclear
Parliament approved on Sunday a budget bill worth 7,930
trillion rials ($319 billion at the official exchange rate) for
the next Iranian calendar year, which starts on March 21,
official media reported.
The budget slows growth in spending in an effort to repair
state finances that have been ravaged by economic sanctions.
Expenditure is to rise about 9 percent from the original budget
plan for the current year - not nearly enough to keep pace with
inflation, which is running near 40 percent.
"Everything passed by parliament is acceptable to us. There
are only a few differences but they are not major," a deputy to
Rouhani, Vice President for Parliamentary Affairs Majid Ansari,
was quoted as saying by the IRNA news agency.
Rouhani, who took power last August after elections, needed
only 10 days of debate to get his budget passed, an apparent
endorsement of his administration as it tries to get the
sanctions lifted by reaching a deal with world powers on Iran's
disputed nuclear plans.
By contrast Rouhani's predecessor Mahmoud Ahmadinejad, who
took a hard line with the West, continually feuded with
parliament over economic issues including the budget, which was
passed with delays of several months.
To seal a nuclear deal, Rouhani will need to overcome
domestic opposition from opponents of his relatively
conciliatory approach towards the West, including some of
Ahmadinejad's allies and senior members of the Revolutionary
Rouhani told parliament in December that Ahmadinejad had
squandered oil revenues on cash handouts and housing projects,
and that Iran faced a mix of high inflation and stagnating
growth, with the economy shrinking 6 percent in the past year.
His budget suggests he views spending discipline as key to
rescuing the economy; the 9 percent rise in his plan is much
lower than the 31 percent increase envisaged in Ahmadinejad's
Iranian-born economist Mehrdad Emadi, of the Betamatrix
consultancy in London, said that after years in which
Ahmadinejad tried to offset the economic sanctions with huge
jumps in government spending, Rouhani was starting to reimpose
normal budget constraints, a process that would take years.
"He is addressing serious problems like the fact that
Iranian banks have started to face rial shortages," Emadi said.
"The budget begins to address these problems and is designed to
rein in inflation."
Iran's budget announcements are fragmentary and involve a
string of revenue assumptions that are subject to sudden change,
so analysts said it was impossible to make firm estimates for
the government's budget deficit next fiscal year.
For example, Rouhani's budget estimates crude oil exports,
Iran's top revenue source, at 1.5 million barrels per day.
Exports, slashed by the sanctions, are now running at just over
1 million bpd, and look unlikely to rise much unless Iran
reaches a comprehensive nuclear deal with the West.
But if Rouhani sticks to economic reforms, the deficit may
shrink significantly. Last week parliament approved politically
sensitive plans to slash subsidies on fuel and food, potentially
saving some 630 trillion rials annually in subsidy payments.
Implementation of the reform has been delayed for several
months while authorities try to soften the blow to consumers by
handing out food packages to over 15 million poorer families.
Next year's budget plan projects a rise in spending on
government operations - excluding items such as activities of
state enterprises - of about 14 percent to 1,950 trillion rials.
It still needs to be approved by the Guardian Council, a
supervisory committee of clerics and lawyers answering to
supreme leader Ayatollah Ali Khamenei.
(Additional reporting by Merhdad Balali; Editing by Susan