Baku, Azerbaijan, Aug 8
By Farhad Daneshvar – Trend:
Iran’s short-term Islamic bonds also known as Islamic Treasury bills have recently become the most desirable commodity for the country’s traders.
“Over the past years the government in a move to reduce its debts, in particular to contractors, has issued thousands of the Islamic bonds,” Mehrdad Seyed Asgari, Norway-based Iranian financial analyst, told Trend.
“The contractors who have difficulties, due to the lack of cash and cash flow, sell-off the bonds, offering generous discounts to entice the traders,” he added.
“Due to the credibility of these bonds, their wide profit margin as well as low risks, traders have shown a keen interest in their purchase,” Mehrdad Seyed Asgari suggested.
Unconfirmed reports suggest that, the contractors offer up to 37 percent discount on the Islamic bonds with a maturity date of less than one year.
Supporters of the government’s policy on issuing the Islamic bonds suggest that this would help the country to climb out of recession, as huge amounts of cash would be diverted to the developmental projects.
Nonetheless, the opponents of the policy suggest that, other side of coin is comprised of the fact that the government covers a part of its current expenses through the Islamic bonds, which, in turn, may worsen already deep recession and increase the volume of the governmental debts.
According to the Central Bank of Iran (CBI), government's debt to the banking system surpassed $58.3 billion (2.2 quadrillion rials) in the fiscal month ending April 20, indicating to the increase of 21.3 percent, year-on-year.
Islamic Treasury bills have covered 15 of the government’s budget resources over the past calendar year starting March 20, the Iranian Parliament's Research Center announced.
In a bid to rejuvenate the domestic debt market and help reduce local firms' reliance on loans from a debt-laden banking sector the Government of Iran had announced plans to increase the issuance of the Islamic Treasury bills.
Back in April, Securities and Exchange Organization of Iran reported that the Government had issued $2.2 billion worth of Islamic Treasury bills.