The Statistical Analysis and Diagnosis for Pathology of Issuing the Islamic Treasury Bill Market in Iran

Decreasing the oil revenue in recent years has de facto led to acceleration of government budget deficit significantly. Besides in the absence of well developed debt market in Iran, the government is per se compelled to resort to the Central Bank and banking network for borrowing and financing its public expenditures, Sine die. However, issuing the debt securities will assist the government to finance its expenses without relying de jure on the Central Bank and banking system resources. It is obvious that, this act of government can pave the way to augment the scope of independency of the Central Bank in process of decision making and optimal implementation of monetary policy Ipso facto. In this context, the Central Bank can exert its prominent role, viz-a-viz open market operation and deal with transaction of debt securities in the second market, to control the volume of liquidity and or accepting these bonds as collateral in the interbank market to reduce the impact of unexpected hike in the cost of short term financing the banking system, quid pro qua. Nonetheless, in Iran, among the various available financial instruments to settle the government debts with different contractors, there is the typical Islamic Treasury Bill, Sui generis. Hence, in this paper, an attempt is made to investigate the existing challenges and loopholes of Islamic Treasury Bill market in Iran. The results prima facie indicate that Islamic Treasury Bills unlike the Treasury Bills issued in other parts of the world, are bearing the risk premium and consequently, the market participants believe that there may be all probabilities for them to be dishonored in certain circumstances. Moreover, the Islamic Treasury Bills are endowed with observed marketability and plausible degree of liquidability in toto. Thus, we can conclude that in the Iranian economy, one may expect that there will be adequate demand for further issuing the Treasury Bills, Sine qua non.