Ahmadinejad seeks budget boost ahead of election

By Zahra Hosseinian

TEHRAN (Reuters) - Iran's president proposed a bigger budget for 2008-09 to parliament on Monday that he said would promote social equality but critics fear will further stoke double-digit inflation in OPEC's second biggest producer.

President Mahmoud Ahmadinejad, presenting the budget before a March parliamentary election that will pit hardline allies against more moderate politicians, outlined a bill totaling 2,745 trillion rials ($294 billion) for the next Iranian year.

"The main direction of the budget is ... increasing and attaining justice, creating equal opportunities for the whole nation ... and reducing inflation," he told the conservative-dominated legislature in a speech broadcast on radio.

Ahmadinejad, who swept to power in 2005 on a pledge to share out Iran's oil wealth more fairly, did not give a comparison or any deficit figures.

But the total figure would represent an increase of around 18 percent compared with the budget approved by the legislature for the current Iranian year, which ends on March 19.

About 715 trillion rials of the total is for the public budget, covering items like wages, subsidies and development projects. This will rise about 4 percent on the same figure approved for this year of 690 trillion rials.

The rest covers the budget for state firms and entities.

Development spending would increase by 30 percent, the president said, without specifying which projects would benefit. "The main reason why the budget for this year has grown is because of the growth of the development sector," he said.

He also said subsidies would increase by a limited amount but did not provide details. Iran subsidizes a range of goods and sectors, including gasoline and bread.

Economists blame the government's spending policies for fuelling inflation, which has climbed steadily since Ahmadinejad took office in 2005 and is now running at about 19 percent.

Ahmadinejad has relied on windfall earnings from high oil prices to boost spending. But inflation is hurting many and economic growth has fallen below targets.

"There is no financial discipline in the government. This is the main problem of the country at the moment," said business consultant Saeed Laylaz.

OIL RICHES

Although parliament has often criticized Ahmadinejad's economic policies, analysts say it has also approved mid-year budget supplements, meaning actual spending by end of each financial year has often been higher than planned.

MPs can amend the budget bill in the weeks ahead.