HIDDEN PUBLIC EXPENDITURES AND THE ECONOMY IN IRAN

Abstract

Fiscal accounts are meant to show how much and where the government spends public funds or commits a country's resources to future payments. Information from government accounts is essential for evaluating government policies and programs in terms of their contribution to addressing social and economic needs and their impact on macro-economic performance. But there is a common problem in published fiscal data that must be addressed before they can be put to use: governments typically have some expenditures and debts that are not reflected in their official accounts. The extent of concealment varies across countries and activities, and the users of fiscal information need to be sensitive to the causes and consequences of such variation. Middle Eastern countries have their own share of hidden spending and liability, and some—such as Iran, Turkey, Morocco, Syria, and the Persian Gulf countries—stand out among nations in the scope and size of fiscal activities that they keep off their budgets. In this paper, we examine the case of Iran, where huge public funds are appropriated and redistributed outside the formal budget. The case is instructive because it shows the wide range and size of hidden government expenditures and commitments that affect the public. It also displays the dire consequences that lack of proper government accounting and reporting can bring to a country.