The government in the debt hole/lengthening of the list of debtors

These days, the list of the government's debt has exceeded the debt to banks and contractors, and there are many news about the government's debt to farmers, sellers of goods, teachers, retirees, etc.

The lengthening of the government's debt list is in a situation where the importers say that the supply of foreign currency for the import of many basic goods and raw materials has faced a long delay, and this year, according to Seyyed Abdul Fattah Nawab, the representative of the Supreme Leader in Hajj and Pilgrimage affairs, even the supply of foreign currency for Hajj pilgrims has faced a challenge. The government is left empty-handed to respond to the country's expenses in a situation where initial estimates indicate that the war has left 270 billion dollars in damages and has also increased the country's military expenses. Economists say that in this situation, the government has no choice but to exercise financial discipline and reduce spending. At the same time, it should solve the challenges of foreign policy by using the atmosphere of diplomacy and dialogue.

The list of government debts is getting wider and longer year by year, and if once the major debts of the government were summarized to banks and contractors, now a long list of government debtors is constantly being revealed; From teachers, retirees and medical staff to farmers, sellers of goods and...

The list of government debtors is lengthening while the government was facing a significant budget deficit before the war. The Majlis Research Center announced in a report that the operational deficit of the 1405 budget is negative 615 thousand billion tomans and the capital balance is negative 325 thousand billion tomans. As a result, according to these figures, it can be said that the bill is facing a deficit of 940 thousand billion tomans; A figure that will be equivalent to 18% of the 1405 budget. Investigations show that this figure in the budget of 1404 was equivalent to 11.4%.

These estimates were made while the 40-day war had not yet resumed, and with the outbreak of the war, the government announced that preliminary estimates indicate that the war has caused a loss of 270 billion dollars to the country.

The list of government debts, war damages and the increase in military expenses are in a situation where the export of oil and non-oil goods is under the pressure of the maritime blockade, and Kepler's reports indicate that the oil reserves in Iran's waters, which were outside the maritime blockade line, are rapidly decreasing. On the other hand, the naval blockade, the bombing of the mother industries such as steel and petrochemicals, as well as the energy imbalance, have reduced the export of the country's currency-earning goods such as steel and petrochemicals.

All these problems have caused the list of creditors of the government to become wider and longer every day. However, not long ago, the Center for Public Debt Management and Government Financial Relations announced that the government's debt until the end of 1404 is equal to 2.7 thousand thousand billion Tomans. This institution, a subsidiary of the Ministry of Economy, announced that the assessed debts of the government until the end of March 1404, are equal to 2,760,000 billion tomans (2.7 thousand hemat) and the definite demands of the government are 2,535 thousand billion tomans (2.5 thousand hemat). Therefore, the excess of debts to claims (deduction of claims from government debts) is 225 thousand billion tomans (2.2 hemats). In this report, it was emphasized that the total debts of the government and state-owned companies are 21.7% of the GDP until the end of June 1405 and 22.2% until the end of March last year, the government's debt to the GDP is 5.9% until the end of spring this year and six percent until the end of last year, and the debt of the government companies to the GDP is 15.8% until the end of June 1405 and until the end of March 1404 is equal to 16.2%. The nation, which had an upward trend since the beginning of 1404, has taken a downward trend since the beginning of 1405.

Also, as explained by the Ministry of Economy, the government's debt to the private and cooperative sector is 2,207,000 billion tomans, to the central bank, banks and credit institutions is 439,000 billion tomans, and to non-governmental public institutions (such as municipalities or foundations) is 114,000 billion tomans.

On the other hand, the government demands 908 thousand billion tomans from banks, 562 thousand billion tomans from non-governmental public institutions, and 1,650 billion tomans from the private and cooperative sectors.

The debt of government companies to the central bank, banks and credit institutions is 3,467,000 billion tomans, non-governmental public institutions and institutions are 1,384,000 billion tomans, and the private and cooperative sector is 1,380,000 billion tomans.

At the same time, the demands of government companies from the private and cooperative sector are 3,570,000 billion tomans, non-governmental public institutions are 26,000 billion and banks are 13,000 billion tomans.

This report is published while the claim of reducing government debts is facing many questions. The review of this report shows that the total reported debts of the government and state-owned companies have reached eight thousand 649 thousand billion tomans; That is, three thousand 422 thousand billion tomans more than the end of 1403. A 65.5% increase in one year makes the question about the repayment sources more serious. The direct debt of the government increased by 41.8% and the state companies accounted for the main part of the jump with a 75.1% increase in debt. Nearly three-quarters of the increase in total debts last year was the share of these companies.

At the end of 1404, state-owned companies owed 3,467,000 billion tomans to banks and credit institutions, including the Central Bank. On the contrary, almost all their demands are from private and cooperative legal entities. This combination ties the repayment issue to the debt collection status. The bank wants its money when due, but the debtor company must be able to provide the necessary resources. If these two times are not in sync with each other, the need for debt renewal and new financing will increase.

In such a situation, lowering the ratio of debt to GDP alone is not the solution to the problem. The ratio of total debts reached 21.7% in June this year, but it is still higher than last year. Last winter, the amount of debt of companies increased, while its ratio to production decreased. What should be clarified is the ability to pay obligations: which debt is due, what resources are available to pay it and how much of the registered claims will actually be collected.

With all these words, economic experts believe that the debt crisis is not an unexpected event for the war-torn government, and the government should manage this situation with financial discipline and reducing its expenses. In this context, Sohrab Delangizan, an economist, told "Sharq": "In war conditions, we always face problems and disturbances; Because, on the one hand, part of the government's anticipated revenues are not realized, and on the other hand, unforeseen expenses are imposed on the government, which are beyond the initial estimates. In addition to these issues, some government expenses cannot be easily eliminated or reduced due to budgetary constraints, and they continue despite changing conditions. For this reason, the budget faces certain challenges during the war, and the country's current budget is no exception to this rule.

He continues: "One of the main problems in this situation is the reduction of the government's real revenues, which causes non-payment of claims. Even if the tax revenues increase nominally, it does not necessarily mean an increase in the real income of the government. The increase in the inflation rate on the one hand reduces the purchasing power of the people and on the other hand, it weakens the purchasing power of the government's financial resources; This means that the government has to allocate more financial resources to buy the same amount of goods and services that it had previously predicted in the budget. Therefore, in addition to increasing the government's expenses, inflation also reduces its financial ability to implement the planned programs.

According to this economist, "on the other hand, the reduction of economic activities can make it difficult to fully realize tax revenues. As mentioned in the reports published at the beginning of the year, Iran's economy has been facing a decrease in economic growth and even negative growth; An issue that can affect the amount of government revenues. In such a situation, the shrinking of the economy and the reduction of the activity of economic enterprises affects the tax capacity of the country and makes it more difficult to collect the anticipated revenues. In the oil revenue sector, the government has not been able to earn as much as expected. Of course, due to the change in the budget structure and the reduction of the direct share of the government from oil revenues in the past years, the share of the government from this place has become more limited than in the past; However, the same amount of predicted oil income has not been fully realized. As a result, the government has earned less than expected from one of its important sources of financing.

This economist emphasizes that in this situation, the government should manage the country by exercising financial discipline and reducing expenses. Besides, by simplifying business regulations and removing annoying regulations, it will provide a platform for productive activities and productive employment as much as possible to reduce the amount of damage to the country's economy. At the same time, take full advantage of the opportunities of diplomacy and dialogue to solve the country's foreign policy challenges and facilitate the space for Iran's economy and trade.