Â Islamic treasury bill is a kind of debt security which has issued in September 2015 for the first time. It’s a zero coupon security with 1,000,000 Rials nominal value. Total value of mentioned security is 10,000 billion Rials at the first step. The main objective of issuing treasury bills in Iran is settling government’s debt to contractors. The government plans to issue more treasury bill with different maturities according to 320,000 billion Rials government debt, it is estimated this market going to be deeper and more efficient. The issued treasury bill with maturity in march 2016 has 26 percent return in market now.
The bills are not the governments first use of debt financing, however. Various branches of the government have issued sukuk, Islamic bonds, to finance their expansion projects over the years.
The central bank has been kept at an arms length from the bonds to avoid making it the governments piggy bank, as before. The bank has been banned from trading them.
The government should very well allow the central bank to dabble in the treasury trade in the future, but only after both fiscal and monetary authorities have earned a reputation for prudence.
The difference between Islamic treasury bill and common treasury bill
The common treasury bills are bought by investor and the government satisfy its debts in this way. Islamic treasury bills mechanism is different because of the Islamic regulation. Islamic treasury bills are given to government creditor directly and they can sell Islamic treasury bills in Frabourse. The treasury general will pay the nominal value of each T.B. to the owner on due date.
One of the most important reasons for listing this kind of debt security in Farabours is reducing the owner’s risk. The owners can easily sell their security in Farabours because this OTC market with over 66-million-dollar average daily trading value, is so liquid.
The benefit of issuing Islamic Treasury Bills
- Figuring out the real risk free rate in Iran Economy
- Proving better environment for improving new financial instrument
- Improving the efficiency government financial policy and central bank monetary policy
- Financing from domestic market
- Tax free return
- Recognition the expectation of risk free rate for treasury bills with different due dates
To conclude, we believe that Islamic Treasury bills can help government implement better financial and monetary policies. We have Treasury bills with 5 different due dates which are trading in the market at the moment.