For the first time, Iran has started to issue sovereign debt to international investors. On September 29, the Islamic Republic began to offer short-term, one-year bonds, under the name Islamic Treasury Bills. The bonds will be issued by Fara Bourse, Iran’s small over-the-counter market.

Around $300m worth of the Sharia-compliant bonds will be issued

Around $300m worth of the Sharia-compliant bonds will be issued, with an attractive interest rate of 20 percent. The offering of Islamic T-Bills comes in the wake of Iran and the P5+1 group reaching an agreement over the country’s nuclear project earlier in the year. As a result of successful negotiations, Iran saw the lifting of sanctions on its financial and economic activities.

Iran sorely needs the money that the bonds will supply, as it struggles under high amounts of debt accumulated by former president Mahmoud Ahmadinejad, the strain of years of sanctions, and more recently, the decline in world oil prices. According to the Financial Times, the Iranian economy is “hampered by large levels of bad debts, punitively high interest rates and double-digit rates of inflation.”

“There is a credit crunch in Iran and the solution is to increase the money supply,” Majid Zamani, chief executive of Kardan Investment Bank, which is acting as market maker on the Iranian bonds, tells the FT. According to the Iranian Financial Tribune, “Iran prides itself on not having defaulted once in its 35-year history on its debts. Moreover, the country has one of the most advanced Islamic markets in the region and issues a wide range of sukuks, or non-interest debt securities.”