The Social Security Organization (SSO) paid 880 trillion rials ($2.1 billion) in outstanding debts to banks as instructed by President Ibrahim Raisi, Solat Mortazavi the Minister of Labor, Welfare and Cooperatives told the parliament on Tuesday.
"The SSO was one of the largest defaulters according to data released by the Central Bank of Iran…This was one of the biggest debt settlements in Iran's banking history," IBENA quoted him as saying.
The SSO is the main insurance company that covers non-state workers and offers voluntary coverage to the self-employed.
As a non-government body, it is largely funded by insurance premium contributions (7% by workers, 20-23% by the employer and 3% by the government).
However, past governments grappling with deep budget holes never paid their full share. An estimated 50 million Iranians, of the total 85 million population, are under SSO cover.
The 2022-23 budget obliges the CBI to publicly reveal the names of defaulters and update the list on a quarterly basis.
High NPLs have hurt the balance sheets of banks and forced them to suspend lending, despite the chronic need of businesses. This, coupled with other ills have put banks at the center of strong censure by economic experts and business leaders.
CBI data show bad loans reached 2,349 trillion rials ($8.7 billion) in Sept 2021. Government and state-owned companies were in arrears to the tune of 4,392.1 trillion rials ($14.6 billion) up until last February – up 12.5% on the corresponding period last year.
In addition, the government owes 2,119.8 trillion rials ($7 billion) to the CBI -- a whopping 41.8% y/y increase.
The CBI earlier said that banks are facing shortage of liquidity in the interbank market, making them more reliant on the CBI for funds. Banks’ credit crunch is largely the function of the deepening government(s) budget deficits.
The CBI proposed that the Raisi administration give banks its shares in companies to reduce the financial burden that has ballooned to several billion dollars.
SSO earlier estimated government debt to be in the region of 3,000 trillion rials ($11.3b). Per provisions of the 2022-23 budget, the Raisi administration was to settle 900 trillion rials ($3.3b).
Arrears to the SSO keep on rising due to the inability of successive governments to pay their share of insurance premium of workers and other unmet legal financial obligations.