Al-Monitor | Navid Kalhor: The rising issuance of variousIslamic sukukand, in particular, Islamic Treasury billsin the past three years in Iran is seenas evidence of the success and allureof the Iranian debt market.However, it should be noted that widespread sales of Islamic Treasury billson Irans nascent bond market comeat a price.
Perhaps the most important factor contributing to the sales of bonds has beenthelack of fundsavailable to President Hassan Rouhanis Cabinet to pay off overdue debts mostly inheritedfrom earlier administrations to private contractors and creditors. As the government did not want to lose its inflationary accomplishment by borrowing from the central bank and the banking system, the Islamic Treasury billsmarket wasinitially tapped to enable it to fulfill its obligations without raising the monetary base.
But in the Iraniangovernment's budgetfor the current Iranian calendar year, which started March 21, the public sector, including government agencies and municipalities, isallowed to issue a significant amount of debt securities. Althoughthis helps state-run organizations sponsor new and old construction and infrastructure projects, as well as pay debts from previous years, it might bring about risk of default for future governments.