The president announced a 20 percent increase in public sector wages in a sign of the economic challenges Iran has faced since the United States pulled out of the 2015 nuclear deal earlier this year.
The speech at Parliament gave only a few general points of the budget – which will now be scrutinized and voted on by lawmakers.
"Last year we faced some problems," Rouhani told Parliament in a televised speech, referring to the protests that hit the country almost exactly a year ago, sparked by anger over economic conditions.
"Those events caused the Americans to change their position regarding the Islamic Republic and the nuclear deal," he said.
"America's goal is to bring Iran's Islamic system to its knees... and it will fail in this, but sanctions will no doubt affect people's lives, and the country's development and economic growth," Rouhani said.
The Americans, he added, view a powerful Iran as a major obstacle in this sensitive region, stressing that they are “afraid of Iran’s capabilities” and have therefore attempted to impede its domestic progress.
US President Donald Trump pulled the United States out the multilateral nuclear deal with Iran in May and reimposed sanctions on it, including on its vital oil industry.
He gave the value of the nominally balanced draft budget, excluding the spending of state enterprises, at about 4,700 trillion rials for the next Iranian year, which starts on March 21.
That figure is up from about 3,700 trillion rials Rouhani had proposed for this year, but the new budget is effectively worth about half of this year's because of the weakening of Iran's currency.
About a third of the state budget consists of subsidies for low-income groups.
Under the unofficial exchange rate used on the free market, the budget is worth about $47 billion.
Rouhani said the budget included $14 billion in subsidies to provide cheap basic goods such as food and medicine, up from $13 billion in this year's state budget.
Officials have said the budget is designed to provide for the basic needs of low-income groups, including state employees and pensioners, support production and employment and seek to relaunch thousands of stalled state projects with the help of private investors.
Rouhani called for trimming the state sector and curbing the government's dependence on oil income, which is forecast at 1,425 trillion rials in the proposed budget.
The government plans to fund 35 percent of the budget with oil revenues, projecting exports of up to 1.5 million barrels a day at a maximum of $54 a barrel. It is down from a peak of almost 3 million bpd in mid-2018
"If the private sector was active in the country ... and if the budget did not rely heavily on oil, the impact of sanctions would have been much less," Rouhani said.
A separate draft budget for state companies, institutions and banks allocates them a total of $127 billion.
The US granted waivers to eight key buyers of Iranian oil – including China, India and Turkey.
Forex 'practically zero'
Rouhani came to power in 2013 representing the more moderate approach, hoping a compromise on the country's nuclear program would reduce tensions with the West and allow foreign investment to boost the stunted private sector.
The return of sanctions has ended that hope, and pushed Iran more toward the self-sufficient "resistance economy" preferred by Iran’s Leader Ayatollah Seyyed Ali Khamenei.
Concern over the economy pushed many Iranians to secure their savings in dollars and gold, triggering a run on the Iranian rial, which has lost around half its value since Trump announced the pullout.
"At one point early this year our foreign exchange cash reserve was practically zero, forcing the government to take hard decisions to save the country," Rouhani told Parliament.
The government has urged exporters to return their dollars to Iran, and Rouhani said they would lose tax incentives if they failed to repatriate their cash.
The Central Bank of Iran (CBI) has used the returning dollars to shore up the collapsing rial, which has recovered to around 110,000 per dollar on unofficial exchanges.
The rial's fall drove up prices across the board, with food and drink costs up 60 percent in the year to November according to the CBI.
The Judiciary launched a crackdown on currency speculators, dubbed "economic disruptors" that has seen dozens of traders put on trial and three corrupt businessmen executed.
Some lawmakers, who were mostly from the southwestern Khuzestan Province, interrupted Rouhani’s speech on two occasions to protest the government’s water policies. Iran is suffering from a decade-long drought, and water shortages have sparked protests over the past year.
AFP, Reuters, AP and Press TV contributed to this report.