Iran Economy News Iran Government’s Heavy Debts

Iran Government’s Heavy Debts

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Iran’s economy has gone through a period of super-challenges and long-standing crises, and the looting officials of this government have increased their wealth and property as much as they can and taken the rest abroad.

They brought debt to the country and, in fact, plunged the deprived nation into a debt crisis in which they themselves had no part in deciding. Today, the volume of these debts has skyrocketed, and it can no longer return to zero. For this government, there is only one way: more debts.

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Increasing the Debts of the Government and Banks

In a report, the Central Bank of Iran (CBI) announced the amount of debt owed by the government and banks to the CBI. By the end of September this year, these debts have increased by 26.1 and 16.7 percent, respectively. The government debt to the CBI in the period under review was equal to 13.96 quadrillion rials [$64.533 billion]. The total debt of banks to the CBI has increased by 16.7 percent to 1.291 quadrillion rials [$4.3 billion], while last year the total debt of public and private banks had decreased.

“On the other hand, the debt of banks and non-bank credit institutions to the CBI at the end of September this year has increased by six percent to 1.291 quadrillion rials [$4.3 billion]. The amount of debt of commercial banks to the CBI was 9.6 quadrillion rials [$32 billion], which shows a 139 percent increase compared to September last year. The amount of debt of specialized banks to the CBI during this period was 446 trillion rials [$1.486 billion], which is equivalent to eight-tenths of a percent less than in September last year,” Arman-e-Eghtesadi daily wrote on November 4.

Although the CBI has not published detailed government budget statistics since December 2018, its recent report reveals dense corners of the government spending crisis. The government’s debt to the banking system has almost doubled in two years. The issue that the International Monetary Fund also mentioned in its October report is the large volume of debt.

This figure amounts to $260 billion, which is equivalent to 44 percent of the country’s gross domestic product. This debt is more than double the debt of the last two years. The only chance that the government has brought is its $11 billion foreign debt, which, of course, is due to its discredit from taking any loans and receiving foreign currency. An example of this was the request for a $5 billion loan from the International Monetary Fund, which was not approved.

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Debt Reflection on Liquidity Growth and Inflation

Are the huge debts of the government only reflected in the bookkeeping accounts or in the computer of the CBI? Unfortunately, not. These astronomical debts show themselves in the growth of liquidity and the crushing inflation rate. To compensate for the deficits and to meet its needs, the Rouhani government eventually resorted to the CBI printing house, sending unsupported banknotes to the market, as well as adding fuel to the high prices of the essential goods of the poor and helpless people of Iran.

In its report in September of this year, the CBI had announced the amount of liquidity as 28.96 quadrillion rials [$96.533 million]. This amount of liquidity has increased by 13 percent compared to last year. The statistics center also says that the inflation rate has reached 41 percent, which only five countries are ahead of Iran.

A careful analysis of the budget situation of the governments in power in Iran in the last decades and their persistent deficits and the relationship between these two important economic issues and the amount of debt of these governments makes it clear that these relations are twin and affect each other.

“From the day the new budgeting system was established in Iran until today, the problem of the budget deficit has grown bigger and bigger along with this newborn. Interestingly, as government revenues increased at different times, not only was the budget deficit not resolved, but it also emerged surprisingly on a larger scale than the year before. It is as if they have cut the navel string of our economy with the budget deficit,” claimed the official website of Iran’s Ministry of Industry, Mine, and Trade on November 2.

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