Gov't Borrowing From Central Bank Rises 50%

EghtesadOnline: A Central Bank of Iran report said the government’s debt to the banking sector increased by 50.8% in the last fiscal year that ended in March.

News ID: ۷۸۶۷۰۷

19 July 2021

Government debt to the central bank reached 1,152.3 trillion rials ($4.68 billion) by the end of the last fiscal year.  It owed almost 764.3 trillion rials ($3.1 billion) the year before.

A QoQ comparison of data indicates 3.31% growth in government debt to the CBI. Government-affiliated companies and organizations account for 341.1 trillion rials ($1.38b) of the total debt, indicating a 13.5% decrease year-on-year.

Total government debt to the banks reached 3,969.7 trillion rials ($16.1b) by the end of last year -- up 35.4%. Companies owned or affiliated to the government accounted for 146.8 trillion rials ($896.7 million) of the debts up 99.5% y/y.

There has been some controversy among senior financial authorities of the government over the government debt to the central bank.

In its report the CBI noted that the huge expansion in the monetary base in the first quarter was the outcome of government borrowing from the CBI discretionary spending.

Back in April, Mohammad-Baqer Nobakht, head of the Plan and Budget Organization, said "the CBI is slow in changing forex income from oil export into rials. So it is the central bank that is the biggest government debtor."

Nobakht made the rare public claim in response to a lawmaker who had asked whether the government was borrowing from the central bank to plug its deficit holes.

"In actuality the government budget deficit is partly due to the fact that the [foreign] currency resources are not changed into rials on time," the PBO chief said.

The former governor of the CBI Abdolnasser Hemmati, however, denied the claim. "The CBI has never been, and will never be, indebted to the government. Take a look at the CBI financial accounts to see who the debtor is."

The senior banker rather sarcastically added that if the CBI owes money to the government it means the economy is on the right track.

Data show the government's deposits with the banking sector (the CBI included) grew 51.4% in the fiscal year under review to reach 1,984 trillion rials ($8.06 billion).

Government firms also increased their deposits by 24.6% in the said period to 70.4 trillion rials ($286 million)

CBI reports show banks’ total foreign assets by the end of the previous fiscal year, according to which the CBI's foreign assets grew by 35.3%, reached 4,703.7 trillion rials ($19.1b).

Banks, including development banks, commercial banks and credit institutions, registered growth in their foreign assets during the last fiscal year of 1.5% to reach 1,173.8 trillion rials ($4.77b).