Pandemic Loans for Iranian Transporters

EghtesadOnline: Deputy Minister of Roads and Urban Development Shahram Adamnejad said 35,000 billion rials ($175 million) worth of loans will be allocated to the coronavirus-hit transportation sector (air, rail, sea and road) over the next few months.

News ID: ۷۵۰۳۷۳

04 July 2020

“These loans will have an interest rate of 12%. Loans worth 60 million rials ($300) will be extended to 113,000 drivers; road transportation companies will also receive 120 million rial ($585) in bank credits with an interest rate of 12%,” he was quoted as saying by the news portal of the ministry on Tuesday.

Highest Inflation

The average annual goods and services Consumer Price Index of the transportation sector in the 12-month period ending June 20, which marks the end of the third Iranian month, increased by 45.1% compared with the similar period of the year before—the highest growth among 12 groups of the basket of consumer goods and services purchased by Iranian households.

With a coefficient of 9.41%, CPI of the sector stood at 265 for the month, indicating a 0.5% increase compared with the month before, according to the Statistical Center of Iran.

The transportation index registered a year-on-year increase of 48.6%, which is also the highest among 12 groups of the basket of consumer goods and services purchased by Iranian households.

Overall, the average goods and services Consumer Price Index in the 12-month period ending June 20 increased by 27.8% compared with the corresponding period of last year, latest data released by SCI show.

The consumer inflation for the month under review (May 21-June 20) registered a year-on-year increase of 22.5% compared with the similar month of the previous Iranian year.

The overall CPI (using the Iranian year to March 2017 as the base year) stood at 214.2 for the month, indicating a 2% rise compared with the month before.

2nd Hardest-Hit Sector by Covid-19

Iran’s transportation sector has sustained losses estimated at 80,000 billion rials ($400 million) following the outbreak of the coronavirus, says Mohsen Sadeqi, a senior official with the Ministry of Roads and Urban Development.

After tourism, transportation took the biggest hit from the pandemic, which prioritizes to receive government aid, he added.

The government approved a 490-trillion-rial bailout ($2.45 billion)—out of a total 750 trillion-rial ($3.25 billion) package for low-income households and struggling businesses—to help small- and medium-sized economic enterprises in the wake of coronavirus.

The Central Bank of Iran identified 14 groups of businesses, including 55 subgroups and 1.2 million enterprises eligible to receive government-backed loans. The loans will be given to small- and medium-sized enterprises hit hard by the pandemic, according to the website of the Central Bank of Iran.

Noting that rail companies and airlines mostly take out loans in foreign currency, the senior official said, “In addition to coronavirus relief measures like granting cheap loans, tax and premium relief, the extension of repayment schedule of foreign currency loans is the newest proposal we came up with to support rail companies and airlines.”

“The lending rate for the government aid package will be 12% to be repaid within two years,” Abdolnasser Hemmati, the CBI governor, said.

Commenting on the interest rate, Hemmati said it is reasonable given the high inflation rate in the country.

“Even if banks set 18% interest on loans, the real interest rate would still be negative when compared to annual inflation … Any rate below 12% would apparently impose further financial strain on banks,” he added. Hemmati said only businesses that did not lay off workers during the corona crisis would be eligible for the loans and instructed banks to process the loans soon and cut red tape.

According to Saeed Rasouli, the head of the Islamic Republic of Iran Railways, the government is offering a total of 9.4 trillion rials ($47 million) worth of low interest loans to rail passenger transportation companies to help them back on their feet after they suffered losses due to the outbreak of the novel coronavirus.

“The loans have been made available from June 8 and 63 companies have been found eligible to receive them,” Rasouli was quoted as saying by IRNA.

Presently, all coronavirus-related protocols as well as social distancing are being followed and trains are running according to the timetables.

$200m in Loans Paid So Far

A total of 40 trillion rials ($200 million) in cheap loans have been granted to businesses impacted by the coronavirus outbreak, says Deputy Minister of Cooperatives, Labor and Social Welfare Isa Mansouri.

“Nearly 900,000 people have registered at Kara.mcls.gov.ir for loans; banks are currently working on about 76,000 files submitted by applicants. Each of these files cover a large number of jobs; loans to 380,000 files covering about one million jobs will be paid in the near future,” he was quoted as saying by IRNA.

“For each employee, banks grant 120 million rials [$600] to employers, provided they retain at least one worker on their payroll.”

Mansouri noted that businesses, which were forced to shut down, receive 160 million rials [$800] for each employee and the 24-month repayment period will start in October.