The government needs to issue 1,240 trillion rials ($5.4 billion) in bonds, which is over and above the amount projected in the March 2020-21 budget, head of the Debt Management Department of the Economy Ministry said.
Mehdi Banani said the government will sell 940 trillion rials ($4.2 billion) in bonds during the first half of the fiscal year, 620 trillion rials ($2.7 billion) of which is above the figure estimated in the budget.
The government will also sell another 620 trillion rials before the current fiscal year is out to meet budgetary needs, ISNA reported.
Banani added that 750 trillion rials ($3.2 billion) was generated in H1 through bond sales.
The government has said it has the go-ahead from the High Council of Economic Coordination to sell the huge volume of bonds. The policy council comprises heads of the three branches of government to address macroeconomic issues.
Chronic budget deficits due to the United States sanctions, which hit the economy hard, particularly oil exports, are a major concern for the Rouhani administration saddled with more than its share of economic, political and social challenges.
With the US penalties taking a toll on the oil sector, the government is under pressure to find ways to compensate revenues from the diminishing oil exports.
There is no accurate data on the budget deficit. However, Masoud Khansari, head of the Tehran Chamber of Commerce, Industries, Mines and Agriculture said Tuesday the government is in the red to the tune of 1,800-2,000 trillion rials ($7.8-8.8 billion). He said the deficits have been partly compensated by the bond market.
Economy Ministry in Charge
The Economy Ministry is now responsible for funding a large portion of the national budget because oil exports are at historic lows but spending keeps climbing with Covid-19 adding to the fiscal crisis.
“There are different ways to finance the budget, including cutting expenses and increasing tax revenue,” Banani said. He did not elaborate.
Due to the economic problems and devastating impact of the coronavirus pandemic, the government’s success in raising taxes is apparently limited as businesses are already hit hard and many have shuttered.
Banani pointed to the sale of government assets (real estate, shares…) and issuing bonds as other of ways to help plug the budget holes.
Speaking on state TV late on Tuesday, head of the Plan and Budget Organization, Mohammad Baqer Nobakht, said the government generated 170 trillion rials ($750 million) from selling its shares in state companies. The amount, he said, was beyond the initial 119 trillion rials ($517m) projected in the 2020-21 budget.
The government also has generated 550 trillion rials ($2.4 billion) from Islamic bonds in 12 auctions held by the CBI every Tuesday.
Buyers of government bonds largely are banks, investment funds, and insurance companies. A portion of bonds are sold on the stock market.
Apart from bond sales in the weekly auctions, Banani said the government has sold treasury bills to the tune of 20 trillion rials and the money is being used to help repay the government’s mountain of debt, mainly to contractors of development projects.
