The CBI said Tuesday 49 trillion rials ($288 million) worth of government bonds were sold to banks on Tuesday in the second round of bond auctions organized by the Central Bank of Iran. 

As per an earlier announcement, the government put on offer Murabeha bonds worth 100 trillion rials ($588 million) and asked banks to put in bids via the interbank trading platform. 

About 51 trillion rials ($300 million) in bonds were sold to lenders in the first auction last week and remaining were bought by four banks yesterday, according to a notice on the CBI website. 

Opening a primary interbank market for bond auctions is a new CBI initiative aimed at helping the government raise funds for budgetary needs as it struggles with bigger deficits due to US sanctions on the oil export industry – the lifeline of the economy.

As per auction rules, banks and non-bank financial entities’ bids are processed by a CBI brokerage and sent to the Economy Ministry for approval.  The brokerage firm should settle the payment in one working day.  

The CBI said eight banks put in bids worth 221 trillion rials at the interbank trading platform on Tuesday and bids of four banks were approved by the ministry.  

A third phase of the auction is set for next Tuesday with bonds worth 70 trillion rials ($400 million). 

Bonds mature in 2024 at 15% payable every six months and are to be sold on gradually in weekly auctions.

Apart from banks, the main buyers of the bonds include investment funds and government creditors, such as the Social Security Organization, the largest pension fund, and contractors of development projects. 

The bond auction initiative aims to boost government finances, reduce trading costs in the interbank market and facilitate access of banks and credit institutions to  government bonds.

Focus on Debt Market 

Raising funds through the debt market is seen as critical for the government saddled with deep budget holes that have become bigger due to the coronavirus pandemic, collapsing oil prices, US sanctions and loss of oil export revenue.

Economy Minister Farhad Dejpasand said Tuesday “the government may not be able to realize 1,400 trillion rials ($8 billion) of its projected revenue in the current fiscal budget,” ISNA reported. 

The government expects to make 1,000 trillion rials ($5.8 billion) from bonds as per provisions of the March 2020-2021 budget. 

Apart from the amount allowed by the budget law, the government plans to secure approval for an additional 1,500 trillion rials from the High Economic Coordination Council — an ad hoc economic decision-making body comprising the heads of the three branches of power — to fix the gaping budget hole.

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