The National Development Fund of Iran, the sovereign wealth fund, is to deposit an extra 10 trillion rials ($32 million) with the Capital Market Stabilization of Fund (CMSF).
“Based on talks with NDFI officials, the money will be paid on Saturday,” IRNA quoted Amir Mahdi Saba’ie, managing director of the stabilization fund, as saying.
Based on a previous agreement with the NDFI, Saba’ie said a total of 70 trillion rials ($225 million) is planned to be injected into the bourse via the CMSF.
“This will augment the CMSF’s clout to help stabilize the bourse,” he said, noting that the fund will infuse “sufficient liquidity into the market if and when it deems necessary”.
The payment is in line with a support plan announced last year. In late 2021, the government officially allowed the NDFI to inject $200 million in the CMSF. At the time, only 10 trillion rials ($40m at the then exchange rate) were deposited and the rest was supposed to be paid in phases.
The CMSF was created in 2017 to help address the credit crunch in the bourse. It has a mandate to support the long-struggling market and safeguard the interest of investors.
As per CMSF articles of association, the stabilization fund is fed via three main financial sources, namely direct government investment, NDFI investment and income from trading fees charged by the Tehran Stock Exchange and the junior exchange Iran Fara Bourse. As per rules, 30% of the income from stock trade fees is deposited with the CMSF.
Rules also stipulate that the NDFI invest 1% of its resources in the CMSF. The money is a loan at 12% to be repaid in five years, but the maturity date can be extended. The CMSF is responsible for paying the principal amount plus interest.
Independent of the government, the NDFI was founded to save a portion of forex earnings from oil and gas for future generations. Like all wealth funds, it lends to public and private firms in need.
In the March 2022-23 budget, the stabilization fund is expected to receive 300 trillion rials ($967 million) from various sources.
As per new support measures announced by the government, all income from tax on share trade will be injected into the CMSF this year.
According to budget, the government expects to earn 104.2 trillion rials ($336 million) from trade in stocks.
