NDFI to Inject $150m in Bourse

EghtesadOnline: The National Development Fund of Iran will deposit $150 million with the Capital Market Stabilization Fund to help boost the ailing stock market.

News ID: ۷۸۷۲۶۸

08 November 2021

Citing officials from the sovereign wealth fund, the state-owned news agency IRNA said that the payment will be made before the current calendar month is out on Nov.21.

Based on an earlier NDFI decision, the money will be a loan at 12% to be repaid in five years and the maturity can be extended. The CMSF is responsible for paying the principal amount plus interest.

The CMSF was created in 2017 to help resolve the credit crunch in the bourse. It has a mandate to supporting the market and safeguard the interest of investors. The fund was launched with an initial 3 trillion rials ($11 million) capital borrowed from the NDFI.

Articles of association of the NDFI state that it should deposit 1% of its resources with the CMCF. However, this aspect of the fund was never upheld. When the stock market took a big hit last year, policymakers thought of enforcing it.

In early autumn 2020, the government officially allowed the NDFI to inject $200 million in the CMCF. At the time, only 10 trillion rials (equivalent to $40 million at then exchange rates) were deposited and the rest was supposed to be paid in phases. But the full payment has been deferred by now.

Last week, President Ebrahim Raisi asked the relevant officials to expedite practical support for the share market with NDFI help.

The NDFI was founded to save a portion of forex earnings from oil and gas export for future generations.

As yet another move to revive the bourse, the CMSF may also be allowed to issue bonds worth 200 trillion rials ($740 million) to quench the stock market’s thirst for liquidity. Reimbursing bonds will be guaranteed by the government.

The share market has been in crisis mode after the price bubble burst in the summer of 2020 and non-stop selloff pulled down share prices as never before.

Now the government has pledged supportive measures to lift the market and help protect retail investors many of whom lost their lives savings.

Independent observers, monetary policymakers and think thinks, including the Majlis Research Center and the Central Bank of Iran, have expressed concern over borrowing from the sovereign wealth fund at a time when its assets remain blocked overseas due to the US economic blockade. They rightly argue that such moves give rise to the monetary base and inflation has been seen over the past several years.