Economy, Business And Markets

Gov’t to Clear Bank Debts in Two Years

Gov’t to Clear Bank Debts in Two Years
Gov’t to Clear Bank Debts in Two Years

The government is determined to settle its outstanding debts to banks in the current fiscal year (started March 20) or at the most by next year in order to augment the banks’ ability to offer loans at lower rates, Mohammad Baqer Nowbakht, the government spokesman said on Friday.

“To enable banks to tap into all their resources we have to reduce the volume of government and private sector debt to banks,” he was quoted as saying by Mehr News Agency.

Noting that the repayment of government debts to banks can help lower lending rates in a "natural and methodical" way without the need for imposing rate cuts on lenders, Nowbaqt said the government is considering several avenues to reform the cumbersome banking system and find new ways to increase their lending ability. He did not elaborate.

The government of President Hassan Rouhani is struggling with a mountain of debt it inherited from its predecessor, Mahmoud Ahmadinejad. The administration now owes over 1 quadrillion rials ($29 billion) to the banks alone. According of official data, it owes an estimated 550 trillion rials ($15 billion) to contractors. It was not clear how and from sources the government intends to repay the billions of dollars that it could not afford after taking office in the summer of 2013.

The senior official and close aide to President Rouhani pointed to reenergizing production units which lay dormant or are seni-active as a priority for the government.

"The administration will seek to pay cheap loans at 10% to these production units.”

Helping Struggling Units

He went on to say, “We have allocated 10 trillion rials ($ 330 million) so far for cheap loans for manufacturing units and provide export incentives in the proposed 2016-17 budget. Nowbakht called on provincial governors to pursue the policy of revitalizing production units saddled with debt and unwanted inventories and said the issue should be settled by next March when the fiscal year ends.

Nowbakht who doubles as head of the Management and Planning Organization, referred to the governor generals' meetings in Tehran this week saying the two-day event sought to coordinate efforts to help revive the embattled production units. “We expect the governors to prepare a list of the production units in need of financial support while giving a detailed account of their needs and providing plans to help revive their activities.”

Nowbakht promised the government’s full backing for the struggling enterprises saying the administration will help them become active and profit-making again. He noted that there may be little or no demand inside the country for some products manufactured by these units. "The government will help create demand for their products inside the country or provide them with export incentives to enable them to export.”

Improving Economic Climate

The official pointed to the government’s economic policies in the past three years and the post-sanctions era saying the government will try to “create jobs and improve growth rates.”

“We want to improve the people’s purchasing power and living standards. At the same time we also try to promote long-term investments.”

Pointing to Iran’s stance in OPEC and oil production, Nowbakht said that Iran will do all it can to restore its fair share of the international oil market. “Some countries benefited from the sanctions to increase their share of the oil market. They are the ones who should now cut production if they want to push prices up. We will try to regain our fair share of the oil market,” he said without naming Saudi Arabia and its destabilizing oil production polices over the past two years that have led to crude prices to plunge to $30 a barrel from $140 two years ago.