It was also clear that due to the slump in production and the spread of poverty, hunger, and unemployment, most of the tax revenue would not be generated and the government would face a significant budget deficit.
Two months after the start of Iran’s new budget year, Rouhani’s government asked the heads of the branches to issue financial securities, which are in reality debts and bonds, and they approved 150 trillion tomans of debt bonds.
Regarding the approval of this amount by the leaders of the three branches of the regime, the FARS news agency on 13 May wrote:
“According to this decree, the government is allowed to compensate for this year’s budget deficit, which is estimated at 150 trillion tomans, 150 trillion tomans in addition to the licenses given in the budget law 2020 (i.e. 90 trillion tomans), to issue financial papers.
“These bonds are to be offered in a variety of debt markets, both in the interbank market and in the dept market in the capital market. According to this report, research centers and many experts believe that continuous and significant borrowing is one of the simplest and at the same time worst ways to compensate for the budget deficit, and in practice, it is not much different from printing money.”
State-run daily Jahan-e Sanat attributed and wrote that the result of the budget deficit through the sale of securities is similar to the result of the government’s relocation of banking resources: “Withdrawals from Central Bank resources are inevitable to offset the budget deficit, and the government will eventually resort to withdrawing from banking resources.
“If the government wants to issue financial securities as well because the main and important buyers of these securities are the banking system and the Central Bank, we will still face injecting money into the economy and the subsequent inflationary consequences.” (Jahan Sanat, 11 May)
Another state-run daily, ‘Donya-e-Eghtesad,’ considered the Rouhani administration’s issuance of bonds as ‘risky’ and ‘unsustainable.’ (Donya-e-Eghtesad, 11 May)
The government’s move to issue bonds or financial securities – after the auction of state-owned companies – is the government’s second deceptive move to cover the budget deficit, which government experts say will hurt the people and the country’s economy, and they call it ‘future selling’.
Various regime governments, including Rouhani’s government, printed unsecured banknotes to cover budget deficits and borrowed from bank resources, which also contributed to Iran’s economic devastation.
Although some regime experts see the Rouhani administration’s approach to issuing financial securities as less harmful than borrowing from the banking system and printing money, it does not solve the problem of issuing financial problems if the outlook for production growth is not good.
The state-run daily Javan wrote also in an article entitled ‘Auction of 150 trillion tomans of other government bonds’ about the negative consequences of issuing financial securities to compensate for the budget deficit:
“Undoubtedly, if only financial securities are issued to cover current expenditures, these securities will mature when they are profitable, and if we do not want to finalize these securities, we will have to republish the securities so that the cycle can quickly leverage the government’s profitable debt, and in fact, we face the problem of ‘future selling’ and the challenge of debt for future governments.” (Javan, 13 May)
The government’s goal in issuing financial securities is to finance current expenditures, and the revenue from these securities will certainly not be used for the costs of the country’s productions.
In an interview with ISNA, a regime economist said that the government’s action is only to finance ‘the government’s current funding’ that will not be ‘successful based on past experience.’ (ISNA, 14 May)
The fact is that economic conditions must be such that investors who buy bonds have confidence in making a profit, while there is no such assurance for bond buyers due to the closure of production and the critical economic situation.
With such a prospect, it is unlikely that people will be willing to buy these bonds, and the Rouhani government will be forced to ask again the regime’s banks and government institutions, and according to the author of the FARS news agency, it will ‘auction’ the bonds.
This move will further destabilize the economy, expand the regime’s financial and economic woes, and intensify the anger of the army of the unemployed and the starving people.