The government has so far sold 970.89 trillion rials ($3.3 billion) in sukuk to shore up its finances in the current fiscal year (March 2019-20).
The budget is being funded with 260.7 trillion rials ($900 million) in treasury bills sold by the government. Bond sales via weekly bond auctions have also contributed 710.19 trillion rials ($2.4 billion) for budget funding, the Economy Ministry said in a press release Wednesday on its news portal, shada.ir.
Chronic budget deficits due to the United States sanctions, which hit the economy hard, particularly oil exports, is a major concern for the government.
With US penalties taking a toll on the oil sector and coronavirus pandemic hitting non-oil trade, the government is under mounting pressure to find new ways to plug the budgetary holes.
There is no precise official data on the ballooning budget deficit. However, estimates suggest the government is in the red to the tune of 1,800-2,000 trillion rials ($6.2-6.8 billion).
The government says it wants to continue bond issuance throughout the year. To cover deficit spending, the ministry says, the government in the current year will need to sell 620 trillion rials in debt beyond those sold so far.
Treasury bills worth 50 trillion rials were sold this week that started Sep 26, the ministry said. That was beyond 6.7 trillion rials in Islamic bonds sold at the weekly bond auction.
Weekly Auctions
The government has launched a series of auctions since May to sell Islamic bonds to banks, investment companies and investors in the stock market.
The auctions are held every week on Tuesdays by the Central Bank of Iran. On the last (18th) round on Sep 29, lenders and investors bought only 6.7 trillion rials ($23 million) worth of bonds.
That was barely 10% of total bonds worth 74 trillion rials ($270 m) offered by the government. Bond auction data indicates a steep decline in investor interest in buying debt in the past two weeks.
The steepest decline was last week when bond sale fell by 76% to 7.1 trillion rials, from 30.8 trillion rials a week earlier.
The lowest ever bond sale occurred this week, indicating growing disinterest both among lenders and investment funds in the money market and stock investors.
A bank was the sole bidder on Tuesday with bids worth 3.8 trillion rials ($13m). The Economy Ministry accepted bids worth 3.7 trillion rials.
The remaining bonds were bought by retail and institutional buyers in the equity market. They bought 2.9 trillion rials of bonds outside of CBI auction.
CBI has often said it supports the auctions for funding budget deficits and preventing the government from over borrowing from the central bank.
The Money and Credit Council, the top monetary decision-making body, last month obliged banks to allocate at least 3% of their financial resources to buy bonds.
