The government plans to sell 110 trillion rials ($720 million) in Murabaha Sukuk on Sunday to fund administrative bodies wanting to purchase goods and services.
Sukuk bonds will be issued in two rounds with 18% yields to be paid every six months, Iran Fara Bourse, the junior market for trading bonds and stocks, announced this on its website.
In the first round, bonds worth 77.5 trillion rials and in the second 32.5 trillion rials worth of bonds will be offered with 48 months and 42 months maturity, respectively.
According to IFB, the bonds will be issued as per provisions set out in the current fiscal budget (March 2019-20) to provide government organizations funds for purchasing goods and services.
Murabaha sukuk are certificates of equal value issued for financing the purchase of goods based on Murabaha contract. Sukuk holders become owners of the underlying goods. The sukuk are typically issued by the seller of the Murabaha goods, while the subscribers are the buyers.
Funds from the sukuk issue are used to purchase underlying goods. As owners of Murabaha goods, sukuk holders are entitled to receive its sale value.
The government is struggling with chronic budget deficits due to the United States sanctions that hit various sectors of the economy, particularly oil exports.
Apart from the 380 trillion rials ($2.5 billion) approved by the Majlis in January 2019, the Ministry of Economy had announced that it would issue Islamic financial securities worth 380 trillion rials ($2.5 billion as per current exchange rates) to partly compensate the budget deficit.
With the new US sanctions taking a toll on the key oil sector, the government is under pressure to find alternatives to compensate revenues from the diminishing oil exports.
