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EghtesadOnline: The Central Bank of Iran's governor has fended off criticism over government payment arrears to the banking sector, stressing that Iran is doing better than a number of other countries in this regard.

"The government's arrears to the banking system are included in the frozen assets of banks. Mainly because of the budget deficit facing the government, the repayment of debts to the banks has been of secondary importance," Valiollah Seif also told ISNA.

Pointing to the arrears of other countries to their banks, the official added that compared with the rest of the world, Iran's state debts to the banking system are not very high.

That is while, he added, "many countries have a higher ratio of GDP to debts" compared to Iran, according to Financial Tribune.

Seif was responding to recent media criticism about government payment arrears to banks snowballing.

The government reportedly owes more than 2 quadrillion rials ($53.3 billion) to the banking system, which have constantly been on the rise in the past decade.

According to statistics, government arrears to the banking system increased from 230 trillion rials ($6.1 billion) in 2004 to 360 trillion rials ($9.6 billion) in 2008. While the volume of debts stood at more than 1.1 quadrillion rials ($29.3 billion) in 2013, it exceeded 2 quadrillion rials by the end of the previous fiscal year in March.

At the Eighth Conference on Development of Investment and Financing System in Iran in mid-February, Government Spokesman Mohammad Baqer Nobakht claimed that "the reported astronomical figures are not the real numbers".

According to Nobakht, who also heads the Planning and Budget Organization, the figure stood at 380 trillion rials four years ago while it has now reached 420 trillion rials ($11.2 billion).

He also announced that the government will issue 700 trillion rials ($18.6 billion) worth of bonds to repay its debt to banks and private sector, and will use articles 35 and 36 of the budget amendment law, which allows recapitalization of public-sector banks from revaluation of foreign exchange assets.

As outlined by Seif, the problem of government debts to the banks in Iran has mainly been a direct result of a lack of discipline.

Although in line with reforming the banking system, which has been a major agenda of CBI, "we decided to move in line with clearing this debt" by forming the debts market and publishing the bonds.

CBI Valiollah Seif Central Bank of Iran Iran government debts