The Central Bank of Iran sold Islamic bonds worth 9 trillion rials ($48 million) in the third round of auction held on a weekly basis to sell government bonds.
Seventy trillion rials ($380 million) in Murabeha bonds were put on offer on June 16 and banks and non-bank institutions were asked to bid.
According to a press release on the CBI website, seven banks and ten non-bank financial institutions put in bids worth 146 trillion rials (790 million) last Tuesday and the Economy Ministry accepted bids worth 9 trillion rials.
As per auction rules, banks and non-bank financial entities’ bids are processed by a CBI brokerage and sent to the Economy Ministry for approval. The brokerage settles the payment in one working day.
The CBI said it will hold the fourth auction next Tuesday at which bonds worth 120 trillion rials ($648 million) are to be offered.
All bonds mature in 2022 at 15% payable every six months.
Apart from banks, the main buyers of the bonds include investment funds, insurance companies and government creditors, such as the Social Security Organization, Iran’s largest pension fund, as well as contractors of development projects.
The bond auction initiative seeks to boost government finances, reduce trading costs in the interbank market and facilitate access of banks and credit institutions to government bonds.
Starting from late May, the government has sold 109 trillion rials in bonds via the CBI. Raising funds through the debt market is seen as critical for the government saddled with deep budget holes that have become bigger due to the coronavirus, collapsing oil prices, US sanctions and loss of oil export revenue.
Economy Minister Farhad Dejpasand said earlier in the month that “the government may not be able to realize 1,400 trillion rials ($7.5 billion) of its projected revenue in the March 2020-21 budget.”
The government expects to make 1,000 trillion rials ($5.8 billion) from bonds as per provisions of the current fiscal budget.
Apart from the amount permitted in the budget law, the government wants to secure approval for an additional 1,500 trillion rials from the High Economic Coordination Council -- an ad hoc economic decision-making body comprising the heads of the three branches of power -- to fix the gaping budget hole.
