The Majlis has let the government settle parts of its debt to public and private entities by divesting it shares in state-owned companies.
During a parliamentary debate on the 2022-23 budget, the parliament decided that the government should repay 1,300 trillion rials ($5 billion) by selling shares in major companies next year, IRNA reported.
Amid strained fiscal budget revenues, swapping stocks in lieu of debt has been one of the means available to the government to reimburse the mountain of debts to state and public companies plus private sector contractors.
A major part of the debt is owed to the Social Security Organization (SSO), the biggest insurance company in Iran that offers insurance cover to non-state workers and the self-employed.
According to Mirhashem Mousavi, the SSO chief, total governments debt to the organization is in the region of 3,000 trillion rials ($11.6b).
“The government must settle 900 trillion rials ($3.3b) to the SSO next year,” he was quoted as saying by the Fars News Agency.
As for the outgoing fiscal year (ends March 20), the government is supposed to repay 890 trillion rials ($3.4 billion) to the insurer by transferring shares.
Government debt to the SSO has piled up due to its systemic failure to pay its share of insurance premium plus other financial obligations under the law.
Raising Capital of Banks
In related news, the government was given permission to spend a maximum 350 trillion rials ($1.35b) from selling shares and property to raise the capital of state-owned banks.
Government-controlled lenders include three commercial and five specialized banks. Bank Melli, Bank Sepah and Post Bank are the three commercial banks.
Bank Maskan (housing lender), Export Development Bank of Iran, the Bank of Mine and Industry, Cooperatives Development Bank and Bank Keshavarzi (agro bank) are the five specialized banks.
The decision was earlier questioned by the parliamentary think tank, the Majlis Research Center, as “ineffective in improving their efficiency.
In a report, the MRC argued that such measures run the risk of lenders’ failure to monetize the assets owned by the government and use the money to raise capital.
Furthermore, it is at odds with Article 44 of the Constitutional Law, which obliges the government to use the acquired income from privatization to finance development projects, fight poverty and expand infrastructure in less privileged regions. Therefore, using the income from divesting shares to raise capital of banks is not warranted, it said.
