Published on July 25, 2014

Iran has been heavily reliant on oil and the fluctuating oil prices have had a direct impact on government's budget. Iran, however, plans to promote an economy independent of oil even though the western sanctions have been eased.

Heavy dependence on oil revenues has affected economic growth of the country. The sanctions may have affected the country's economy but it also helped this nation realize how dependent they were on oil revenues.

In the budget bill for March 2014-March 2015, 39.9 per cent of national income is dependent on oil exports and other hydrocarbons like gas condensates.

Western sanctions imposed against Iran have resulted in a massive decline in its oil exports. However, instead of improving its non-oil revenue systems including taxation, reducing unnecessary expenditures, this oil-based economy ended up devaluing the national currency in order to increase the value of its suppressed oil incomes. The government managed to do this by selling its petrodollars at a higher dollar-rial conversion rate.

The government must take measures to boost production, encourage domestic production of strategic goods and set up markets in different countries.

Iran plans to produce 5.7 million barrels per day of crude by 2018. Currently, Iran is producing about 3 million bpd of crude.