Economy, Domestic Economy

Parliament Reviews Gov’t Funding in New Budget

Parliament Reviews Gov’t Funding in New BudgetParliament Reviews Gov’t Funding in New Budget

The parliament gave the government the go-ahead to issue more bonds this year to fund ministries.

Currently, the parliament is reviewing the government’s budget for the 1395 fiscal year (started 20 March 2016), the outlines of which were approved on Sunday.

MPs ratified parts of the new budget regarding debt issuance on Monday, state-owned IRNA reported.

Nine ministries and their subsidiary companies, along with the Atomic Energy Organization of Iran, can now sell sukuk, Islamic bonds, to raise 100 trillion rials (about $2.86 billion) for their projects.

The government can also separately raise an additional 50 trillion rials through Musharaka sukuk to repay its debt to contractors. It can sell bonds with one to three-year maturity dates. Currently, most bonds in the Iranian market have one-year maturity dates.

The ministries of o, energy, defense, industries, roads, telecoms and youth are authorized to issue bonds.

MPs also authorized municipalities and their subsidiary companies to sell 70 trillion rials of sukuk to fund their operations.

The parliament also approved the repayment of government debt incurred before the end of 1393 fiscal year (ended March 2015). The repayment is capped at 125 trillion rials by MPs.

The government’s general budget, not including state-owned enterprises, amounts to 2,670 trillion rials ($73.3 billion at market exchange rate). This marks a 13.1% increase compared to the previous year in rial terms. Iran’s 1394 budget stood at 2,360 trillion ($64.8 billion).

The country also separately budgets some 6,817 trillion rials ($187.2 billion) for hundreds of government banks and companies.

The MPs also passed a law that requires some government companies and all state-owned banks to pay profits and tax based on the budget. These companies are also required to pay 8.3% Value-Added Tax where applicable. Based on the law, the treasury can directly take the sum from their accounts at the treasury.

Also, the parliament has allowed the government to use the money raised from the sale of its stakes in banks and insurance companies that are being privatized, and inject it into government lenders, including Post Bank.

The cash will increase the capital of government banks, most of whom are near insolvency due to bad lending practices and poor policies.