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Gov’t Debt to Banks Soars

Gov’t Debt to Banks Soars Gov’t Debt to Banks Soars

G overnmental debt to the banking system surged during the first six month of the current fiscal year. Governmental debt reached 1.28 quadrillion rials ($47 billion at official exchange rates) by Sep. 22, 2014, showing a 16.2 percent rise from March 20, 2014, according to the latest data released by the Central Bank of Iran (CBI).

The overall amount of debts of private and state owned sectors to the banking system stood at 6.7 quadrillion rials ($245 billion) by the end of the first six months of the current fiscal year; indicating a 500 trillion rials ($18 billion) or 22 percent surge during the period.

 Debt to Lenders

The increasing government debt to the commercial lenders is one of the main challenges faced by the government. Government’s debt to commercial lenders increased 24.1 percent to 902 trillion ($32.9 million) by the end of the first six months of the current fiscal year. The Iranian fiscal year starts on March 21.

State-owned companies have managed to clear 40 trillion rials ($1.4 billion) of their debts to commercial banks. Thus, their debts to lenders declined 14.3 percent from 313 trillion ($11.4 billion) to 268 trillion ($9.7 billion) during the first half of the year.

Part of the non-performing loans (NPLs), which commercial banks are contending with at the moment, are owed by state-owned companies.

 Debt to CBI

The data indicates governmental debts to the central bank edged down 2.7 percent to 153 trillion ($5.6 billion) during the period.

Monetary officials, the CBI governor specifically, have repeatedly urged the president to clear the government’s debts.

Contrariwise, state-owned companies’ debts to the central bank increased 6.6 percent during the period and stood at 200 trillion rials ($7.3 billion).

 Foreign Assets

The banking system’s foreign assets also rose during the first six month of the year. Total foreign assets owned by the banking system went up 3.4 percent to 1.7 quadrillion rials ($63.3 billion).

Commercial lenders led the rise with a nine percent increase in their foreign assets, whose total reached 388 trillion rials ($14.1 billion).

But most of Iran’s foreign assets are owned by the central bank which holds 2.1 quadrillion rials ($77.5 billion) overseas. The bank’s foreign assets expanded 4.4 percent during the period.

The figure includes the central bank’s frozen assets which have been blocked by sanctions directed at the bank for allegedly circumventing sanctions placed against the government’s nuclear energy program.

 Foreign Debt

The government’s foreign debt is on the rise though it is still at far from that of developed countries at one percent of GDP.

Total foreign debt fell $544 million to $6.1 billion during the six months ending Sep. 22, 2014, central bank data show.

Foreign debt servicing is set to rise in the future. Over $900 million of the Iranian government’s debt will reach maturity during the current fiscal year. But, the figure rises to $1.3 billion for the year ending March 2016.

Also, the government holds $2.06 billion of long term foreign debt with over five years to maturity.

Additionally, the report includes money supply data for the six month period ending in Sep. 22, 2014. Accordingly, money supply expanded 9.9 percent to 6.5 quadrillion rials ($238.7 billion).

Financialtribune.com