The Economy Ministry says it reimbursed 496.31 trillion rials ($1.6 billion) bonds (principal and interest) since the beginning of current fiscal year until July 11.
Of this 370 trillion rials ($1.2b) was the principal amount and 126.2 trillion rials ($407 million) interest, IBENA reported, citing ministry data.
The ministry said reimbursed bonds outweighed government income from new debts so far this year. The government sold 450 trillion rials ($1.45b) bonds up until July 11 including 220 trillion rials ($709m) bonds sold at the weekly auctions during the period.
The government sold 150 trillion rials ($490m) in treasury bonds since the beginning of the current fiscal on March 21. Treasury bills are underwritten and given to government contractors in lieu of unpaid bills.
As per provisions of the fiscal budget, the government is required to reimburse bonds worth 1,719 trillion rials ($5.5b) before the calendar year is out next March.
The Raisi administration, like its predecessor, is struggling to raise funds as it struggles with ballooning deficits due to the 2018 US sanctions on the oil export industry – the lifeline of the economy.
Selling debt has gained traction over the past three years as a source for deficit spending.
Government income from bonds was 105 trillion rials ($338m) in 2015. It jumped to 2,020 trillion rials ($6.5b) in March 2020-21 before declining to 1,825 trillion rials ($5.8b) last year.
The bond auctions was launched in May 2020 and banks, investment funds and stock market investors were asked to take part. Banks and investment companies are the main buyers of the bonds.
The government hopes to make 1,030 trillion rials ($3.3b) by selling debt this year. Of this amount 860 trillion rials ($2.7b) is planned to be offered in the weekly auctions.
Selling bonds to cover budget deficits is preferred by the CBI on the premise that it helps control inflation arising from the budget deficits.
Bond sale, however, has its own critiques. Most economists say that selling debt should be a temporary policy and the government cannot, and should not, depend only on it for long. They opine that selling debt is tantamount to postponing the government’s financial liabilities to the unknown future.
There is also concern about the detrimental impact of large bond offers in the bourse as it tempts investment companies to put their money in the bond market.
