REPUBLIKA.CO.ID, DUBAI -- Iranian President Hassan Rouhani will hike military spending by more than a third in the next fiscal year despite presenting a “cautious, tight” budget to parliament on Sunday in response to falling oil prices and punishing sanctions arising from the country’s disputed nuclear program.

Rouhani proposed a general budget of 8,400 trillion rials (312.13 billion USD at the official exchange rate) for the Iranian fiscal year starting March 20, 2015. This includes the entire the sprawling public sector.

A smaller government budget, part of the larger general budget, was set at 2,200 trillion rials. These are based on an oil price of 70 USD, as opposed to 100 USD this year, Rouhani said. Oil has fallen some 40 percent since June to under 70 USD on Friday.

"The budget is drafted with a cautious eye to the oil prices,” Rouhani said in a speech to parliament broadcast live on state television. “The current situation demands a more subtle and realistic approach to (the) budget draft.”

The 2015 general budget will be six percent above this year’s, Rouhani said, although inflation means this will be a cut in real terms and will tighten spending in some areas.

Yet defense expenditure will rise 33.5 percent to about 282 trillion rials, most of which will be assigned to the elite Revolutionary Guards. The Guards' budget will increase by about half to 174 trillion rials.

Nuclear talks between Iran and six powers have been extended until June. In the meantime, Iran can still access 700 million USD per month of frozen oil revenue held abroad.

According to official Iranian figures, the country produces 2.7 million barrels of oil per day, of which 1.4 million barrels are exported.

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