New Fund to Help Boost Provincial Development

EghtesadOnline: The government is set to create a new fund to boost investment in development projects in the provinces.

News ID: ۷۸۷۴۷۹

22 December 2021

The new fund is forecast in the March 2022-23 budget, according to a press release seen on the Planning and Budget Organization’s (PBO) website.

If established, this would the first of its kind and is said to be an initiative of President Ebrahim Raisi dubbed as the ‘Progress and Justice Fund.’

On inception the government plans to allocate 1,750 trillion rials ($6 billion) for the new fund. It also will be financed from income generated by administrative bodies in the provinces, including revenues from selling government assets and a percentage of tax income in each province.

According to the PBO, this setup should motivate administrative bodies at the provincial level to strive more in  selling unneeded government assets.

Despite the fact that governments are almost saddled with  chronic budget deficits, administrative bodies have time and again refused to do their fair share in contributing to the income side of the national budget.

Income from divestitures, the budget draft says, would be used in its entirety for the development of province that has divested the property.

“The more provinces succeed in selling assets, the more they would be able to access income for their own growth and development,” the PBO said.

Resources of the fund will be deposited with agent banks and lenders will grant loans up to three times the deposited amount to private sector projects.

Money from the fund will be at the disposal of provincial planning councils. The councils will decide on the allocation of funding based on priorities of each province’s projects.

The PBO said the fund can and would go a long way in helping the government realize economic growth targets next year.

The government has forecast 8% economic growth for the next fiscal year that begins in March. A tall order, economists say, given the burden of the economic blockade imposed by the United Sates in 2018 over Iran’s nuclear program.

While talks have started in Vienna to restore the almost tattered 2015 international agreement abandoned by Washington in 2018, PBO officials have said the next fiscal budget has been drawn up on the assumption that the sanctions would not be eased or lifted.

Data released by the Statistical Center of Iran earlier in the month show the economy overall grew by 5.9% in the first half of the current fiscal year (March 21-Sept. 22) compared to last year’s corresponding period.

Excluding oil production, GDP growth was 4.1%, the SCI said.