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The government has accumulated debts to contractors of development projects since early 2010s during Iran’s financial crisis.
The government has accumulated debts to contractors of development projects since early 2010s during Iran’s financial crisis.

Delving Deeper Into Debt

The funds raised by the debt issue will be spent to finish the array of incomplete development projects across the country
The government only met 58%, 68% and 39% of its projected development spending during the fiscal March 2015-16, March 2014-15 and March 2013-14 respectively

Delving Deeper Into Debt

The Ministry of Economy has been given the go-ahead to sell up to 145 trillion rials ($3.8 billion) worth of short-term bonds, as parliament speaker, Ali Larijani, has criticized the sheer volume of debt issuance stipulated in the upcoming year’s budget.
The issuance, which is expected to take place before the Iranian yearend (March 20), includes 85 trillion rials ($2.2 billion) worth of Islamic Treasury Bills with a maturity of up to one year plus 60 trillion rials ($1.58 billion) of the same bonds with maturity of up to two years, IRNA reported on Saturday.
Iran’s treasury sold its first batch of ITBs to domestic investors in September 2015. The bonds were given as debt repayment to contractors who had the option to resell them in Iran Fara Bourse over-the-counter market or wait and redeem them at maturity. 
Mutual funds and investment companies are said to be the main customers of the bonds that are sold at a discount to their face value and bear no coupons, meaning they are traded at a lower price than their face value, but are redeemed at face value on maturity.
The funds raised by the debt issue, according to the chairman of Iran Planning and Budget Organization, Mohammad Baqer Nobakht, will be spent to finish the array of incomplete development projects across the country.
 Unfinished Projects
It is estimated that the completion of all the unfinished projects across the country requires upwards of $40 billion.
“The government had earmarked about 600-650 trillion rials ($15.78-17.1 billion) for completing these projects in the budget bill for the new Iranian year (March 2017-18). However, after the revision by Majlis Joint Commission–a parliamentary body responsible for reviewing the budget bill before its final ratification–on Wednesday, the figure was raised to 700-750 trillion rials ($18.4-19.7 billion),” Nobakht said.
The general budget for the new fiscal year, excluding revenues earned by ministries and state organizations and companies, totals 3.45 quadrillion rials ($90.5 billion). The figure shows a 17% rise compared to the budget law of the current year (March 2016-17).
Nonetheless, figures published by the Central Bank of Iran show the budget earmarked for the development sector has never been fully allocated in the past few years, as the government failed to mobilize the revenues it predicted.
“The main reason for the government’s failure in providing resources for development is that it fails to achieve its target revenues,” Mohammad Taqi Fayyazi, the head of Budget Team at Majlis Research Center, said.
“Only 1.44 quadrillion rials ($37.4 billion) of the 1.96 quadrillion rials ($50.9 billion) in projected revenues were materialized in the eight months of the current Iranian year (March 20-November 20). Logically, spending should keep pace with revenues.”
The government was supposed to earmark 387 trillion rials ($10 billion) to development projects in the eight-month period, whereas only 39% of this amount have been injected into these projects.
This, in fact, has been the case during the past three years, as the government only met 58%, 68% and 39% of its projected development spending during the fiscal March 2015-16, March 2014-15 and March 2013-14 respectively.
“Resources are allocated based on priorities. And the priorities include salaries and wages of state employees and buying back issued bonds and paying their interests … What little remains goes to development projects,” Fayyazi said.

 Government Debts
The government has accumulated debts to contractors of development projects. These debts started to pile up in the early 2010s during Iran’s financial crisis. The debt has been a chief instigator of the economic slowdown.
The total value of overdue payments to contractors by ministries has been unofficially estimated at up to $35 billion.
Iranian lawmakers voted on Saturday for the government to issue a further 50 trillion rials ($1.3 billion) worth of bonds and for municipalities to issue as much during the upcoming new year. 
The parliamentarians also authorized the government to sell 50 trillion rials worth of its fixed assets, including state properties.
The Securities and Exchange Organization of Iran has balked at undertaking the issuance of government debt, citing recession in the stock market.
The government pays up to 25% on its one year ITBs, while inflation stands at about 8.7%. With no risk, it is only natural that investors would shy away from stocks.

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