A Majlis Joint Commission spokesperson said lawmakers have approved part of the government budget bill that allows the Oil Ministry to issue up to $3 billion in Islamic bonds in the next fiscal year that starts in March.
The decision comes as part of Note 5 of proposed budget allowing related to the ministry’s debt repayment. The provisions stipulate that the ministry may issue Islamic bonds through affiliated public companies up to $3 billion in rials and foreign currency.
Earnings from the five-year bonds should go for repaying the principal amount plus interest on matured bonds, reimburse liabilities to banks and pay contractors.
The joint commission is a legislative body responsible for reviewing the budget bill and the five-year economic development plans proposed by the government.
$900 Million Treasury Bill
According to Mehdi Mofateh, the joint commission allowed the government to issue 100 trillion rials ($900 million) in treasury bills with one-year maturity to keep the flow of maintain Treasury payments.
“It has a good approach adopted by the government to issue bonds with maturities of less than a year to be able to pay contractors on time,” Mofateh told reporters.
$30 Billion Foreign Finance
According to Shana, the commission members approved another section of the bill that allows the government to use $30 billion in foreign finance.
Mora teh said of this amount, $5 billion would be borrowed from Russia for development projects.
As per the provisions of Note 3 of the budget bill, private sector projects, cooperatives, knowledge-based companies and non-government institutions can apply for foreign funding after submitting collateral to agent banks.
The bill also allows the government to use up to $1 billion from foreign finances to equip universities and research and technology institutions, laboratories and workshops.
Additionally, the government is permitted to allocate a minimum of $2 billion in foreign finance, sourced from foreign finances mentioned in the bill, for urban railroad expansion and to mitigate air pollution on the condition that municipalities pay 15% of their share of the project and guarantee loan repayments.
Capital Boost for Bank Maskan
The spokesperson for the joint commission said the government has said in the budget bill that it wants to increase Bank Maskan capital by 50 trillion rials ($450 million). This was approved by the MPs.
As per the Note 8 of the March 2019-20 budget bill, Bank Maskan’s debt to the Central Bank of Iran (up to 50 trillion rials) will be transferred to the government and be calculated as capital increase for the main home lender.
According to Note 5 of the budget as proposed by the government, the government is allowed to issue up to 50 trillion rials ($ 471 million) in Islamic bonds and allocate the earnings to the settle the principal and interest on bonds that mature in fiscal 2018-19.
In next year's budget bill, funds are allocated according to priority. In other words, the government has devised two ceilings for income. The first is for a higher priority that covers urgent and unavoidable spending. The funds for the first ceiling is almost guaranteed.
The second ceiling covers low priority spending of the government which will be allocated only if the forecast revenues are realized – something observers are skeptical about.
