Economy Minister: 50% of Banking Resources are Locked

Ali Tayebnia, the Minister of Economy, states that due to the debts of previous governments and the failure to collect banking claims, "about 40 to 50 percent of the resources of Iran's banking system are now completely locked" and "cannot provide loans." In an interview with the Tuesday, January 23 issue of the Shargh newspaper, Tayebnia discussed some banking and economic problems. The Minister of Economy pointed to two major issues facing Iranian banks: first, "non-performing" claims from the private sector (debts that borrowers do not want or cannot pay), and second, the heavy debts of the government to banks. According to the Minister of Economy, besides the private sector's debts to banks, the government also owes 100 trillion tomans to banks, which has put heavy pressure on Iran's banking system. Previously, the Tasnim news agency reported on December 20 that according to the Central Bank's announcement, the government's debt to the banking system had increased by 20%. This news agency wrote that the issue of frozen assets in the country's banks has reached a point where even paying off all government debts will not resolve it. In another part of his interview, Tayebnia mentioned that the Tehran Municipality is one of the major debtors to the banking system, and its debt is non-performing, stating that this debt is not being paid on time and is "not being paid at all." The Minister of Economy added that the Central Bank has prepared a list that includes the names of over 500 individuals and legal entities in the private sector, with Amir Mansour Arya (ranked one or two) at the top, who was executed. Tayebnia also stated that Babak Zanjani does not rank among the top debtors to banks but is among the largest debtors to the government. The Minister continued that when the new government came to power, the ratio of unpaid debts to banks (non-performing claims) was 14%, which has now decreased to 11%. He explained why individuals and legal entities have been unable to repay their loans at this large scale by citing several reasons: "Political pressures on banks to provide loans to projects that are not economically justified, collusion between banks and project owners, and the tripling of currency prices that caused projects to lose their economic advantages and project owners to be unable to repay." Tayebnia said that a large portion of debtors have neither sufficient collateral nor adequate assets, citing an example: "One major debtor who owes 8,500 billion tomans to the banking system has total assets and properties worth no more than 2,500 billion tomans." The Mehr Housing project of Mahmoud Ahmadinejad's government was another blow to Iran's banking system, according to the Minister of Economy. Tayebnia added that while the monetary base was 40 trillion tomans until 2007, the Central Bank created 45 trillion tomans for the implementation of this project (credit line), which was one of the inflationary factors in the previous government. Earlier, on January 3, Iranian lawmakers approved a bill that, if confirmed by the Guardian Council, will halt the construction of new Mehr housing. According to officials in Rouhani's government, "many of the Mehr housing complexes lack water and sewage treatment systems" and have been built in areas that "lack infrastructure." Nevertheless, Ayatollah Ali Khamenei, the leader of the Islamic Republic, stated in a meeting with the government delegation in September 2014 that "millions of people are waiting for the completion of Mehr housing and this work must be pursued seriously and completed." In another part of his interview with Shargh, the Minister of Economy referred to the declining inflation rate in recent years, evaluating a 9% inflation rate as appropriate. Tayebnia also stated that he does not wish to remain the Minister of Economy in the next government.