Iran to Launch Leasing Facility to Help Expand Transport

Iran is reviewing two major projects to engage in further leasing activities to develop its rail and air fleet, the minister of roads and urban development announced.

"Leasing facility for railroad expansion and aircraft leasing can take us far in the development of the transport system," Abbas Akhoundi also said while addressing the Fourth Iran-Europe Banking and Business Forum in Tehran on Saturday.

Iran is awaiting the delivery of 200 airplanes –three of which have been delivered–made possible mainly through foreign leasing that removed concerns the country would face any difficulty in financing the deal.  

Akhoundi noted that with the formation of the Transport Development Fund, the proposal for which was approved in September 2015, assets belonging to the transport sector will be better managed.

As to other ways of financing to boost the leasing option, specifically for renovating the air fleet, the minister named the capital market and issuance of participatory bonds for projects with short-term returns.

Securities and Exchange Organization of Iran has been tapped "to issue bonds for entering the market soon".

International sanctions mainly aimed at the Iranian financial system forced the country into a state of relative seclusion and hampered its ability to employ foreign investment and finance for its infrastructure and other major projects, many of which have been left by the wayside as the annual budget alone cannot answer for all the needs of an 80-million-strong country.

Considering estimates that Iran will need $43 billion to achieve the 8% growth goal of its sixth five-year development plan (2016-2021), various ways of financing Iranian efforts were discussed by keynote speakers in the second and final day of the forum.

Along with the head of Monetary and Banking Research Institute Ali Divandari, whose organization co-hosted the event with Germany-based founder of International Bankers Forum, Nader Maleki, Akhoundi discussed prospects of Iranian economy with an eye to attract foreign investments.

Return of Stability

Akhoundi emphasized the promotion of an understanding that the national budget alone cannot finance colossal infrastructure projects.

That is why, he stressed, his ministry has a three-pronged approach on the national, regional and international levels to create ties for absorbing more funds.

Divandari identified a lack of stability in Iranian economy as a result of years of sanctions as the main reason for finance troubles.

In spite of a slew of problems hitting the Iranian banking system, Divandari chose to see the full half.

"We are currently entering a period of stability and therefore we expect foreign investment to become available," he said.

The country's banks are grappling, among other things with poor capital adequacy, a lack of adherence to international standards and conforming to modern anti-money laundering and combating terrorism financing regulations.

Divandari pointed to the recent news of President Hassan Rouhani's government increasing state-owned banks' capital by 22 trillion rials ($5.9 billion).

"The Central Bank of Iran has devised a special plan to upgrade the capital requirements of banks, which will be soon notified," he said.