Using Central Bank of Iran’s hard currency resources is the government’s only recourse to clear its debts to the banks and at the same time improve the lending power of banks, Abdolnasser Hemmati, CEO of Bank Melli Iran said Saturday.
“The government, in the draft budget, had plans to settle debts to banks with the help of the CBI’s unfrozen assets overseas and by issuing bonds. However, the Majlis rejected both plans in its primary review of the proposed budget,” ISNA quoted him as saying.
Hemmati noted that the foreign exchange resources would help solve the banks’ capital shortages “without expanding the monetary base.”
The senior banker noted that the crucial issue is still under discussion between the government and lawmakers and would be debated in the upcoming session of Parliament.
“Lawmakers are asking banks to improve and expand their international relations, but shortages in banks' capital are among the major challenges for developing international links,” Hemmati said.
Issuing bonds can and should also help settle the mountain of government debt; however, forex resources would have a more positive impact. “As such, resources will also help reform the structure of banks and provide them with more capital.”
The Rouhani administration 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.
The administration now owes over 1 quadrillion rials ($29 billion) to the banks alone, a legacy it inherited from the former government.
