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Internal Report: Iran's Government is Drowning in Debt

October 19, 2021
Arash Hasan-Nia
6 min read
Internal Report: Iran's Government is Drowning in Debt

Predictions on the future price of the dollar in Iran – or even concrete indications of the inflation rate – are seismic enough news that they often come without further explanation. Recently Iranians were left with the impression that if sanctions continue, the price of the dollar by 2027 might be as much as 285,000 tomans. For context, it currently stands at about 27,000.

A leaked report for the deputy minister of economic affairs at Iran’s Planning and Budget Organization was the source of this horrifying figure, which quickly gained traction on social media. But the report was more wide-ranging than that, offering up different scenarios for the (modest) boom or bust of the toman and other macroeconomic variables such as growth rate, depending on whether US and EU sanctions continue. Perhaps most worryingly of all, it also offered a seemingly honest appraisal of the Iranian government’s domestic debts.

The First Denial, the Last Doubt

The initial reaction by the Planning and Budget Organization’s PR team was, in keeping with a grand tradition, to deny the existence of the report. But after the full text went online, the PBO backtracked, saying instead it described only the “personal opinion” of the author, who was described as “not approved” by the organization. The PBO further claimed it had been compiled under the Rouhani administration. What this was meant to connote was not clear.

The author of the report, entitled An Estimation of the Debts of the Iranian Government to Different Sectors in the Period 2021 to 2027, was given as Abolfazl Garmabi: an expert within the PBO’s Macroeconomic Affairs Office. The text states that the contents do not necessarily reflect the opinions of the PBO, but does reflect those of the Macroeconomic Affairs Office.

It was dated August 2021: the transition period after Ebrahim Raisi won the election (and been inaugurated after August 5), but before he had appointed his cabinet. With this in mind it could be argued the report was compiled under the last government. Whether the new government's approach to economic forecasting is so different from the previous government’s that an expert report should be completely ignored is probably a matter for further study.

Fears for a Future of Perpetual Debt

The most interesting part of the report relates to estimations of the Iranian government's debt to various sectors from 2021 to 2027. Its main purpose seems to be to warn about the worrying state of government financing, and a future sharp increase in debt.

The report notes a growing “imbalance” in Iranian state coffers and the continuation of a flawed revenue and expenditure structure which, without a fundamental revision, could bankrupt the Islamic Republic. The Iranian government’s debts are divided by the author into different categories, including those owed to contractors, to public NGOs like the Social Security Organization and the National Development Fund, to banks and in domestic bonds.

The government’s overspend can be attributed to multiple factors. The first and most serious is the defective internal system of the Islamic Republic, which allows for inefficient tax collection, cuts to national revenue, and incoherent debt management are among the issues. In recent years the government has tried to make up for the shortfall by, for example, seizing foreign exchange reserves or borrowing from the Central Bank.

An early, milestone promise by Ebrahim Raisi has been to build one million new housing units in Iran for every year of his tenure. It comes even as his government strained to compensate for the budget deficit of 300 to 450 trillion tomans (US$10.8 to 16bn) by selling a fresh round of bonds via Iranian banking institutions and the Central Bank. Excessive use of this mechanism in the future will increase the debt through interest, as the PBO report’s author warns.

Sanctions are of course also further limiting government revenues, increasing nominal debts: a situation that has now gone on for the best part of a decade. The report compiled for the PBO estimated that if sanctions are lifted this year, government debts to all sectors will stand at 1.89 quadrillion tomans ($68bn) by the end of this year, and 15.5 quadrillion tomans ($561bn) by 2027. If they are not lifted, the report put the final government debt at 38.4 quadrillion tomans ($1.394 trillion) by 2027.

The total government debt by 2027 if sanctions are lifted was estimated as follows (trillions of tomans):

Internal Report: Iran's Government is Drowning in Debt

And if sanctions were not lifted:


Internal Report: Iran's Government is Drowning in Debt

Bonds: A Toxic Compromise

The report estimates that the government’s debt to new and historic bondholders alone, if the sanctions are lifted this year, will be more than 330 trillion tomans ($11.9bn). If sanctions stay in place, it warns this could increase to 16.9 quadrillion tomans ($616bn) by 2027.

The lack of debt market components and the limitations on debt instruments have not led to a reduction in interest rates. This places a heavy burden on the government to repay both the original debts and interest on the bonds in the coming years. Given what the report calls the “likelihood” of ongoing sanctions on Iran, the author states that other effective options – such as a significant increase in tax revenues – would only increase the burden of government debt repayment obligations.

Pension Fund Super Crisis

The report also forecasts a significant increase in government debt to public institutions, which make up the lion’s share of the debt. It warns that this will come to 1.4 quadrillion tomans ($50bn) by the end of this year, of which 455 trillion billion tomans will be owed to the Social Security Organization and 900 trillion to the National Development Fund. If sanctions are not lifted, the report said, debts to the Social Security Organization will increase tenfold by 2027.

It comes as the Iranian national economy is facing up to a burgeoning “super crisis” in the arena of pension funds, which fall within the purview of the Social Security Organization. This was probably the thinking behind the drastic debt increase forecast in this part of the report.


The final part of the report examines the sensitivity of Iran’s debt-to-GBP ratio, according to International Monetary Fund (IMF) standards. This currently stands at 30 percent, but the report found that if sanctions continue, the Iranian government’s debts will outweigh GBP by as early as 2023, effectively rendering it bankrupt. Even if sanctions are lifted, the author found, the same scenario is likely – just not until 2026.

The Iranian government’s domestic debts and its inability to repay them are matters of serious concern already. But the suggestion that even if sanctions are lifted, debts are forecast to grow at such an alarming rate that the government will go bankrupt in the next half a decade, ought to be sending alarm bells ringing at the highest echelons of the regime.

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