Iran''s President Mahmoud Ahmadinejad has for the first time admitted that the fall in world oil prices will affect the economic projects of his government, local media reported on Thursday.

"If we fix the oil price at 30 dollars a barrel in the budget, we will have to abandon much of our economic projects ... We have to set it at 30 to 35 dollars as we don''t determine the oil price on international markets," he said.

He acknowledged that "oil prices will be low for some time" because of the global recession.

Iran, which is OPEC''s second largest producer, has an official oil output of 4.2 million barrels a day, with half of the country''s budget dependent on its crude exports.

Ahmadinejad boasted only last month that his government could run the country "with a barrel of oil priced at between eight and five dollars."

"Even if we reach the point where the enemies do not buy our oil any more, we can manage the country. Thanks God, fluctuations in oil prices will have no effect on the next budget," he said.

Ahmadinejad swept to power in 2005 on a populist campaign of ploughing huge amounts of oil-generated cash into local infrastructure and granting low-interest business loans to create jobs.

He has come under fire over such policies, which have resulted in several key economic figures being sacked, including the central bank head and economy minister.

Economists have criticised the focus being placed on encouraging consumption that has seen imports surge rather than on investment in domestic industry and savings for the future.

The nose-dive in world oil prices could cost Ahmadinejad dearly in the run-up to presidential elections set for June 2009.