Islamic bonds will be offered in three phases worth 250 trillion rials ($1 billion) at 15%, 16% and 17%, respectively for one, two and three years maturities.
Banks, non-bank credit institutions and investment funds are invited to partake. The CBI hold the auctions on behalf of the government.
As per procedures, investors should put in bids for a minimum of 500 bonds each at par value of 1000 rials ($0.004) via the interbank auction platform managed by the CBI as well as the trade platform of the Tehran Securities Exchange Technology Management Company.
The weekly bond auctions started in May 2020 when banks and investment funds were compelled to allocate significant amounts of their financial resources to bond buying. Later other institutional investors and retail traders joined but their contribution was meager.
Last year the government held 42 auctions until the end of the fiscal year in March and earned 1,257.4 trillion rials ($5.4b).
Chronic budget deficits due to the economic blockade unleashed by the former US president, Donald trump, have hit Iran’s economy hard. The tough sanctions have drained oil revenues, the lifeblood of the economy and the main source of national income.
With the penalties taking a toll on the key oil sector, the government is under severe pressure to find ways to compensate the revenues from diminishing oil exports.
Economists say funding budget deficits via the bond market is a safer option than the government borrowing from the central bank, which runs the risk of expansion of monetary base.
The CBI boss Abdolnasser Hemmati earlier admitted that the bond sales helped the economy escape the risk of hyperinflation due to the expanding monetary base and money supply.
Critics, however, warn that overreliance on bonds to finance budgets will only postpone the government debts and saddle successive governments with mountains of unpaid debts.
Earlier in the week the Economy Ministry said the bond sale will be in line with the budget law. Bond sale is high on the government agenda to generate 1,250 trillion rials of which 800 trillion rials ($3.4b) would be used to reimburse the principal and interest on matured bonds sold in recent years.