Alireza Mirmohammad-Sadeqi told state radio that the sovereign wealth fund lends in rial and foreign currency to key private and public sector industries, and most borrowers have been unable to repay the forex loans on time.
“Since inception the NDFI has granted 390 deferrals on 190 loan contracts. In short, repayment of each loan has been postponed twice on average,” the NDFI website quoted him as saying.
NDFI is independent of the government and was set up in 2011 to help curb dependency on oil revenue and save a percentage of the earnings from energy export for future generations.
The fund lends to nongovernment public sectors, private firms and cooperatives when government revenues are low, namely during low global crude oil prices and when the government is unable to meet its oil export targets due to economic sanctions, as is the case since 2018.
“Presently, the majority of currency loans are given to currency-earning industries, such as the oil, gas and transportation sectors plus power plants and steel companies,” Mirmohammad-Sadeqi said.
He reiterated the need to safeguard the fund’s resources for the future generation, saying that multiple loan deferrals and long maturity dates hurt the lending capacity of the fund.
“In some cases loan contracts have been extended up to 12 years,” he noted. “This indeed undermines management of the fund and its investment clout.”
As per law, 80% of NDFI resources should be used to fund private sector projects with non-governmental public entities taking the balance.
Due to shrinking oil revenues linked to the US sanctions, the input of the fund has declined while governments continue to use NDFI resources to plug the gaping holes in the budget.
As per the fiscal budget, NDFI share from oil export is 1,370 trillion rials ($4.8 billion).