Iran’s government intend to repay its debt to banks and contractors until the end of next Persian calendar year (March 2018). The mentioned debt will be settled using leasing Sukuk, setteling Sukuk and Islamic Treasury Bills.
Leasing Sukuk: A significant part of government’s debt will be settled using leasing Sukuk. According to this method some of the governmen’s assets will be leased to the creditors and the government will pay asset’s rent in predetermined intervals. The using right of the asset will be transferred to the government and creditor will receive the nominal value of each Sukuk on due dates. In addition to mentioned rent the asset will be returned to government on due dates. There is no accurate estimation for the rate of these Sukuk because of decreasing trend of inflation rate. According to this trend, it is estimated that the inflation rate might decrease much and we would have one-digit inflation rate in the upcoming year. This estimation may make these Sukuk less attractive for the investors.
Settling Sukuk: one of the best instrument which the government can use for settling debt to the creditors without any inflation effect is settling Sukuk. For example, some of the government’s creditors have some taxation liability to Iranian National Tax administration, the government use this kind of instrument for omitting this circle and shortening the procedure. The mentioned instrument has no interest rate.
Islamic Treasury Bills: In general, the usage of this instrument is for financing. The main advantages of this kind of instrument are their liquidity because they can trade in Farabourse secondary market. Islamic Treasury Bills defines according to government aggregated debts to banking system and the creditors. Islamic Treasury Bills are short term Instrument and the investor will receive the nominal value in maturity. After decreasing oil price and its impact on government’s revenue, the government can’t manage the money cash flow for paying creditors claims. This instrument could help government for handling money cash flow. The interest rate of this kind of instrument specifies accurate risk free rate in economy and the central bank can execute interest rate monetary policy by buying and selling bonds in the market.
To conclude, organizing debt market has great effect on economy and influence on different parts and this causes efficient and deeper debt market. On the other hand, these instrument can solve freezing liquidity problem in economy but it is needed to see how the government can manage the process.