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Somewhat surprisingly, the Iranian parliament has now approved a government request to amend the 2016-17 budget law that it had previously deemed irresponsible to help pay off debt to the banking system. However, the extent of the problems facing Iran’s chaotic banking system means that the amendments will be of little benefit as the government seeks to stabilize the sector.
Under the amendments, the government will, for one year, be able to use excess state foreign exchange reserves held at the Central Bank of Iran (CBI) to settle its outstanding debt to the CBI and the banks. This amendment, which was earlier proposed by the government, was voted down by the previous parliament, and initially rejected by the Majlis Economic Commission in the current parliament, on the grounds that it would set a dangerous precedent for the administration to draw on Iran’s forex reserves “rather irresponsibly.” (CONTINUED - 667 WORDS)