Economy, Business And Markets

Iranian Gov't OKs $3.7b for Debt Clearance of Banks

Gov't OKs $3.7b for Debt Clearance of Banks Gov't OKs $3.7b for Debt Clearance of Banks

As part of a new presidential directive approved by the Cabinet, the Planning and Budget Organization of Iran has been permitted to clear a portion of the government's debts to the banking system.

President Hassan Rouhani on Monday communicated a measure approved by his ministers, which decrees that PBO "is permitted to allocate a maximum of 146.2 trillion rials ($3.78 billion) from the surplus assets of the Central Bank of Iran to clear the confirmed debt of the government to agent banks", IBENA reported.

According to the directive, Bank Keshavarzi (Agriculture Bank) will be reimbursed the highest volume of debt at 58 trillion rials ($1.5 billion) while Bank of Industry and Mine will be paid the lowest at 400 billion rials ($10.3 million).

Bank Tejarat at 32 trillion rials ($829 million), Bank Saderat at 25 trillion rials ($648 million), Bank Mellat at 17.2 trillion rials ($445 million), Bank Sepah at 7 trillion rials ($181.4 million), Bank Refah at 5.2 trillion rials ($134.7 million) and Bank Melli at 800 billion rials ($20.7 million) are the other lenders slated to receive the debt repayment from the government. 

Minister of Industries, Mining and Trade Mohammad Reza Nematzadeh has spoken of the administration's vision of preventing further indebtedness to the banking sector, even though the volume of debts has risen substantially in the past four years.

"Printing new banknotes, which was undertaken in the past, creates inflation," Nematzadeh said, taking a jab at the previous administration. "The current government has steered clear of racking up more debt to the banking sector and printing new bills even though it may create economic momentum."

That is while according to the latest official figures released by the central bank, the government's debts to the central bank almost tripled from 131.61 trillion rials ($3.4 billion) by March 20, 2013, to 354.80 trillion rials ($9.19 billion) by November 20, 2016 .

On the other hand, the government's debts to the banking sector stood at 642.6 trillion rials ($16.6 billion) by August 22, 2013, while it more than doubled to reach 1.432 quadrillion rials ($37.1 billion) by the end of the same month in the current fiscal year.

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