Municipalities in big cities sold 114.7 trillion rials ($370 million) ‘participatory bonds’ in the last fiscal year that ended in March.
This was more than double on an annualized basis (106.8%) according to data released by the Central Bank of Iran.
Municipal bonds are debt securities issued by municipalities to fund development projects. Bonds were sold by municipalities in Tehran, Mashhad, Isfahan, Ahvaz, Tabriz, Karaj and Shiraz to pay for expansion of rail networks, pathways, rehabilitating urban structure and developing Bus Rapid Transit (BRT) systems.
Citing data released by the Securities and Exchange Organization, the CBI said municipalities sold 18.2 trillion rials ($58.7m) bonds in the first month of current fiscal year.
Municipal bonds were issued as per provisions in the fiscal budget. On where the funds from bond sales would be used, Masoud Nosrati, Iranian Municipalities and Rural Management Organization’s deputy for developing and managing resources, earlier said municipalities are allowed to sell 50 trillion rials ($161m) bonds for completing railroad expansion projects.
“In addition, 20 trillion rials [$64m] was allotted to expanding urban transportation and developing BRT networks in big cities,” he said.
Law stipulates that repayment of bonds sold for such projects is guaranteed jointly by municipalities and the government’s Plan and Budget Organization.
Gov’t Bonds
The CBI report includes data about bonds issued by the government, state firms and private companies.
Debt market data show the government sold 2,185 trillion rials ($7 billion) bonds. It included 1,165 trillion rials ($3.7 billion) in treasury bills and 840 trillion rials ($2.7b) in Murabaha bonds sold at weekly auctions. Data shows 166.6% rise in treasury bills but 35.5% decline in Murabaha bonds y/y.
Treasury bills are underwritten and given to government contractors in lieu of unpaid bills.
The government and its affiliated companies sold standard salaf securities worth 153 trillion rials ($493m) -- a whopping 251% rise from the year before.
Standard parallel salaf is an Islamic contract similar to futures with the difference being that the total price is paid in advance.
Private companies issued corporate bonds worth 321 trillion rials ($1b) last year, down 11.6% compared to 363.1 trillion rials ($1.17b) in the corresponding period last year.
As per regulations on corporate bonds, companies must guarantee the reimbursement of principal and interest. Apart from acquiring credibility approval from rating agencies, companies wanting to issue bonds must also present third person guarantee or shares as collateral.
Despite the expanding footprint of private companies in debt financing, the market is dominated largely by the government, often depriving private enterprise much-needed financial space and opportunity.
