Private Sector NDFI’s Main Beneficiary

EghtesadOnline: Iran's sovereign-wealth fund has approved more than $36 billion in foreign exchange loans since its inception about six years ago until the third quarter of the current fiscal year to Dec. 21.

News ID: ۷۸۱۴۵۲

22 January 2018

The latest performance report published by the National Development Fund of Iran indicates that $34.4 billion of the approved resources were allocated and the Central Bank of Iran was officially notified about the same.

Of this amount, $19.8 billion were extended to the private sector, $101 million to the cooperatives sector and $14.5 billion went to projects belonging to businesses affiliated to non-government public entities.

According to NDFI's statute, its resources should be used to prop up development and infrastructure projects, but they are not to be lent to the government, Financial Tribune reported.

In allocating both its foreign exchange and rial loans, NDFI employs the services of agent banks within the Iranian banking system. It notes in its report that $13.4 billion of the aforementioned funds were paid to applicants in cooperation with agent banks and the central bank.

"In addition to facilities allocated through agent contracts, $11 billion were separately allocated to implement national projects related to water, soil and agriculture," the fund states in its report.

To break down the expenditure, $8 billion pertained to organizing water resources, $1.5 for developing farmlands in the southern and western provinces of Khuzestan and Ilam, $500 million for water supply in Sistan-Baluchestan Province, $500 million for pressurized irrigation plans and $500 million for rural water supply.

Agent Banks

Another portion of the foreign exchange resources of the rainy day fund was deposited in agent banks, which amounted to $6.73 billion by the end of Q3, of which $6.38 billion are active deposits.

The NDFI only channels the loans via agent banks to delegate the management of resources, including the decision on what projects they consider feasible.

According to NDFI's report, six deposit contracts collectively worth $400 million have been issued, one each for Bank Keshavarzi, Post Bank, Bank Parsian, Bank Tejarat, Bank Saman and Bank of Industry and Mine to be allocated as loans for providing  the down payments and assisting  private Iranian contractors who win overseas tenders.

As for rial loans, NDFI points out in its report that it used to allocate these loans by signing contracts with agent banks until the end of the fiscal 2014-15, but after a regulatory change, it has since engaged in making rial deposits with the agent banks.

The fund has deposited a total of 118.8 trillion rials ($2.64 billion) to agent banks by the end of the third quarter of the current year.

At present, 70.6 trillion rials ($1.57 billion) of the resources have been returned to NDFI, leaving 48.1 trillion rials ($1.07 billion) in the loan book of banks.

From the beginning of the current year until the end of Q3, NDFI deposited 80.5 trillion rials ($1.79 billion) with state-owned lenders while its deposits since March 2015 amounted to 191 trillion rials ($4.24 billion).

The performance report of NDFI comes at time when the beleaguered entity has come under spotlight with pundits and lawmakers sounding the alarm on the wealth fund's dwindling resources.

Founded in 2011, NDFI replaced its predecessor–the Oil Stabilization Fund– with the aim of cutting the government's dependence on oil revenues and promoting development projects.

However, the fund has digressed from its main mission and in effect turned into a revolving account for the government's budget spending. A recent shakeup at the top management reflects that mood.

A recent report by a parliamentary think tank also punctuated the woes of the fund, stressing that government withdrawals be curbed significantly.