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Throughout the process of reviewing the budget bill, the MPs raised concerns that the government is becoming increasingly dependent on raising money by issuing debt to cover widening budget deficits.
Throughout the process of reviewing the budget bill, the MPs raised concerns that the government is becoming increasingly dependent on raising money by issuing debt to cover widening budget deficits.

Iran Parliament Sets Cap on Government Borrowing

Iran Parliament Sets Cap on Government Borrowing

Iranian lawmakers set the ceiling on Sunday for government, ministries, universities and municipalities' bond issuance as part of the next year’s (March 2018-19) budget at an aggregate of 1.78 quadrillion rials (about $38.86 billion at current exchange rate).
The MPs sizably cut many of the initially proposed figures with regard to debt sales in the budget.
In its original proposal, the government asked to be allowed to issue up to 873 trillion rials ($18.97 billion) of bonds. The parliamentarians only approved 778 trillion rials ($16.9 billion) or 10.8% less.
However, despite diminishing the cap, lawmakers apparently were not against increased borrowing.
As per the Majlis Joint Commission’s decision, the MPs mandated the government to issue bonds worth 1 quadrillion rials ($21.73 billion) for clearing the debts of energy and agriculture ministries’ subsidiary companies. What’s more, the Rouhani administration has to issue 10 trillion rials ($217.3 million) more for renovating and equipping the country’s schools.
Parliamentarians also gave the nod to the government's proposal to hand over two types of Islamic bonds, if left unsold, to government creditors, including project contractors, consultants and equipment providers.
The two types include those issued by ministries, state-owned firms, universities, research institutions and technology parks for “economically and technically justifiable” development projects designated by the government’s Economic Council. The second is debt securities meant for financing incomplete projects, developing universities and assisting provincial projects.
MPs approved the revised outlines of the next budget last Wednesday. They had rejected it the first time it was put to vote three days earlier.
The general outlines were rejected by a vote of 120 to 83 and referred back to the commission to be revised within three days.
The commission is a parliamentary body responsible for reviewing the budget bill and the five-year economic development plans proposed by the government before their final ratification.


Nearly 740 trillion rials ($16 billion) worth of bonds will reach their maturity date next year, according to former governor of the Central Bank of Iran, Tahmasb Mazaheri.
Throughout the process of reviewing the budget bill, the MPs have repeatedly raised concerns that the government is becoming increasingly dependent on raising money by issuing debt to cover widening budget deficits while showing no signs of cutting expenditures.
The ratio of debt to GDP in the Iranian economy is larger than 60%, while the gross financing needs to GDP stand at 30%, according to a recent parliamentary study. This means that the debt balance combined with the financing required to pay the current debt is high compared with the government’s financial capabilities.

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