Iran Gov’t Arrears Under Radar of PBO, Economy Ministry

EghtesadOnline: The government has launched two offices to monitor and manage its piles of debts, a deputy at Plan and Budget Organization said.

News ID: ۷۸۲۸۰۰

03 June 2018

According to Hamid Pour-Mohammadi, one such office has been set up at PBO and the other at the Ministry of Economic and Finance Affairs, with both entities working to put an order to the government’s finances.

“At PBO, the Office for Settling Government Debts was established, which works to identify government arrears and providing solutions for these problems and their repayments within the framework of budget laws,” Pour-Mohammadi was quoted as saying by IBENA.

“At the Ministry of Economy, another office for government debt has been launched to collect and determine the government’s debts and then refer them to PBO to find a way for their disbursement.”

According to Financial Tribune, Pour-Mohammadi noted that in recent years, the government has settled many of its debts to the banking system and the bulk of what remains is arrears accumulated from previous years.

Iranian banks and credit institutions held a total of about 1.3 quadrillion rials ($30.87 billion) in non-performing loans by the end of the previous fiscal year on March 20, 2018, according to a parliamentary report.

The vice governor of the Central Bank of Iran last month expressed doubts about the possibility of fully recovering the banking resources tied up in non-performing loans, a thorny issue dragging on the troubled banking sector for nearly a decade.

“While the banking system bears the heavy burden of financing the country’s small-, medium- and large-scale projects, it is grappling with many problems,” Akbar Komijani added.

“One of these problems concerns the large pile of bad loans that we have no hope of recovering fully.”

The banking sector has been struggling under President Hassan Rouhani, who took office in 2013, to recoup billions of dollars in debts piled up during the previous administration.

Banks have been traditionally burdened by targeted schemes such as extending loans for the massive Mehr Housing Project. Lenders’ isolation from the global financial system during the sanctions’ years also contributed to their woes.

By tightening supervision over banks and forcing them to clean up their balance sheets, which also led to the liquidation of many unregulated credit institutions, the Rouhani administration intends to avert a crisis.