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Iran is planning a significant increase in its defense budget for the upcoming fiscal year, following recent tensions with Israel that have raised concerns about wider conflict in the Middle East.
Government spokesperson Fatemeh Mohajerani announced on Tuesday that the administration has proposed a 200% rise in next year’s defense allocation to the parliament, without revealing specific details.
For the current fiscal year, Iran’s total defense spending was around $8 billion. The budget for military institutions in 2024, covering all branches from the Islamic Revolutionary Guard Corps to the conventional army and national police, is set at 2,530 trillion rials, approximately $4 billion based on current exchange rates. A portion of this budget, just over $2.1 billion, is designated for strengthening military capabilities through the purchase and development of weapons.
Additionally, €1.8 billion, or $1.94 billion, has been allocated for promoting sustainable security from oil revenues.
It remains unclear whether Mohajerani’s comments pertain to the entire defense budget or specifically to the portion intended for enhancing military capabilities.
The parliament has preliminarily approved a total proposed budget of 64,000 trillion rials, roughly $100 billion, for the upcoming fiscal year starting in March.
Iran relies heavily on domestic arms production for its defense strategy, with limited transparency regarding overall military expenditure. Support for regional proxies is not included in public accounts, as Tehran prioritizes these alliances to bolster regional influence and protect against perceived threats from the US and Israel.
In recent years, Iran has expanded its ballistic missile capabilities and provided support to militant groups in Lebanon, Iraq, Syria, and Yemen. The Iranian leadership views these initiatives as crucial to national security, fearing that any retreat could invite foreign interference aimed at regime change.
Despite the planned budget increase, Iran’s military spending remains modest compared to other regional powers. According to the Stockholm International Peace Research Institute, Iran’s military expenditure in 2023 ranked fourth-highest in the Middle East, far below Israel’s and significantly less than Saudi Arabia’s.
Iran’s economic stability is closely tied to its oil and gas exports. Combined revenues from these sectors are projected at 21,000 trillion rials, or $32 billion, with crude oil production expected to reach 3.75 million barrels per day, priced at an estimated €57.5 per barrel.
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Iran also faces challenges from high inflation, currently around 35%. The budget forecasts a decrease in inflation to 28% next year.
President Masoud Pezeshkian, who took office in July, has expressed concerns about the financial strain on his administration, largely due to US sanctions limiting Iran’s oil revenues.
The recent depreciation of the currency following Iran’s missile strike on Israel further highlights the economic pressures facing the country. The exchange rate remains volatile amid ongoing tensions with Israel.