The Economy Ministry settled dues by paying 9.96 trillion rials ($280 million at market exchange rates) of Islamic Treasury Bills on Sunday. These were the second batch of such bills ever offered.
The bills were given to government contractors in lieu of overdue payments. The government is behind on payments to thousands of contractors for their services. These debts accumulated late in early 2010s during Iran's financial crisis. The debt has been a chief instigator of the economic slowdown.
The Economy Ministry started issuing bills to repay part of the Energy Ministry and Ministry of Roads and Urban Development's liabilities last year.
According to the exchange’s chief executive, Amir Hamouni, Iran Fara Bourse is listing 100 trillion rials ($2.8 billion) of fresh Islamic Treasury Bills.
Demand outstrips supply 10 to 1 for these securities due to their higher interest compared to bank rates, Hamouni told Securities and Exchange News Agency.
The government bills offer 24.4% interest annually and have a six-month maturity, while banks offer 16% on their one-year deposits. The government is offering 400 trillion rials of debt securities to finance its spending this year.
The government redeemed holders of its first batch of Islamic Treasury Bills in March, paying holders 5.58 trillion rials ($164 million at market exchange rate) in the process. Iran’s Treasury sold its first batch of government bills, called Islamic Treasury Bills, to domestic investors on September 30.
