Rouhani's Government to Issue Participation Bonds to Exit Recession

Iran's Minister of Economy states that the government of Hassan Rouhani will issue up to 16 trillion tomans in participation bonds to pay off its debts, which is part of the government's new efforts to 'exit economic recession.' According to Fars News Agency, the issuance of participation bonds is in line with what is called the new 30-point package for exiting recession. Ali Tayebnia, the Minister of Economy, Mohammad Baqer Nobakht, the head of the Management and Planning Organization, and Valiollah Seif, the Governor of the Central Bank of Iran, attended the unveiling ceremony of the new package on October 17. The government's latest efforts come after a warning letter from four of Rouhani's ministers about the risk of the economic recession turning into a crisis. Following this, government members stated that a new economic package was on the way, which had been planned before the letter's text was published. According to IRNA, Mr. Tayebnia stated, 'In the proposed package for exiting recession, we have planned to create a market for debts so that the government can pay its debts to the private sector and contractors through the issuance of participation bonds, leasing sukuk, and treasury bills.' He mentioned that this would facilitate the possibility of 'conducting open market operations.' The Minister of Economy indicated that in the first phase, '6 trillion tomans of leasing sukuk' would be issued. Additionally, '5 trillion tomans of participation bonds' will be issued, and the groundwork for issuing '5 trillion tomans of treasury bills' is also included in the current year's budget law. On October 17, the head of the Management and Planning Organization also stated that the offered package continues the economic policies of the Iranian government that have been designed and implemented since 2013. According to Mohammad Baqer Nobakht, the new package, which has a six-month period from the beginning of the JCPOA until the lifting of sanctions, will be implemented with two approaches: 'controlling inflation' and 'economic growth.' Mr. Nobakht explained, 'Because expectations have been created, but we are still under sanctions.' The Governor of the Central Bank of Iran also announced a reduction in the current interest rate. He stated that two approaches are considered for overcoming financial constraints and reducing the current interest rate, which are the reduction of legal reserves and the Central Bank's entry into the interbank market. The interbank market can be used as a tool to prevent the increase of banks' debts to the Central Bank, resulting from an increase in the monetary base.