For more than two years the government’s budget has been under mounting pressure due to the hostile economic sanctions unleashed by the outgoing US president, Donald Trump, and the devastation created by Covid-19.
Speaking on primetime TV on Saturday, Farhad Dejpasand said that the capital market funded the economy to the tune of 3,200 trillion rials ($12.3 billion) in the first six months of current fiscal year. This amount was more than last year’s total of 2,640 trillion rials ($10.2b).
Dejpasand said most of the funds sourced from the capital market was through selling government bonds. He said the government earned 1,170 trillion rials from selling stakes in major companies in the first seven months of the current year to Oct.21.
Despite the relatively high amount, the minister noted that “the government still needs to sell bonds.”
Earlier, Mehdi Banani, head of the debt management department of the Economy Ministry, said plans call for selling at least 620 trillion rials ($2.4b) by March.
"Government needs to fund a big project estimated to cost 800 trillion rials and wants to do it via the stock market," Dejpasand told state TV.
Its concerted efforts to raise funds for the deepening budget deficits through the debt market is the main reason behind the market’s bigger footprint in the economy.
The government has generated funds through Murabaha bonds sold largely during weekly auctions held by the Central Bank of Iran. The auctions are held every week since May where the CBI, on behalf of the government, sells bonds to banks, investment funds and retail investors in the bourse.
Chronic budget deficits due to the United States unending sanctions that have hit the economy hard, particularly the oil and banking sector, are a major concern for the Rouhani administration in its last and final year.
With US penalties taking a toll on the key oil sector, the government is under pressure to find ways to compensate revenue from diminishing oil exports and the high cost of running the country as the coronavirus spreads death and destruction in the country.
Earlier in the week, head of Plan and Budget Organization, Mohammad Baqer Nobakht said the government failed to realize 480 trillion rials ($1.9b) in projected budget revenue during the first seven months this year.
Divestment on Track
Dejpasand said the government has done well in fulfilling its privatization mandate and expedited divesting assets through the stock market.
"The government earned 320 trillion rials (1.3b) via selling assets in the first six months of the year. During the whole of last year the government had made 60 trillion rials from privatization," he told state TV.
Dejpasand said privatization plans are implemented "in a transparent environment" and pointed to procedures such as using exchange-trade funds to implement privatization schemes that have been opposed by workers of major manufacturing companies and economic experts.
The growth in the government's divested assets is linked also to the increasing participation of retail traders.
Data from the Central Securities Depository of Iran indicate that the first six months of the year saw a flurry of new investors in the bourse unheard of in its 53-year history.
More than 8.83 million codes were issued for investors by the CSDI in the first half of the year, an unusual number compared to the less than 12 million issued in more than a half a century.
Trade value has increased in proportion to the rising number of investors. Average daily trade was 250 trillion rials during the heydays of the stock market in the month to July 21, indicating an eleven-fold increase compared to the same period last year.
The Tehran Stock Exchange entered a steep correction phase in mid-August after gaining about 300% in the first five months the year. The decline has continued and the future viability of this key sector of the economy remains uncertain.