As a major shareholder of the Islamic Development Bank (IsDB), Iran is looking at new ways to contribute to increasing the bank’s capital, Economy Minister Ehsan Khandouzi told the IsDB Chairman Muhammad Sulaiman Al Jasser on the sidelines of the annual meeting of the bank’s board of executive directors in Jeddah.
"To preserve Iran's support for the bank, Iran as one of the major shareholders has taken final steps to increase the bank's capital shares…The government bill to this end will be reviewed by the Majlis," he was quoted as saying by EcoIran.
Referring to mutual cooperation, the two sides emphasized the need for removing obstacles impeding closer collaboration.
The government in Tehran last year submitted a bill to parliament regarding the contribution to the sixth round of the IsDB capital increase. The proposal is to sustain Iran's status as the third largest shareholder and boost its voting clout in the board.
The bill was approved by the Cabinet but must become law to be implemented.
In 2020, the IsDB board of governors approved the 6th General Capital Increase amounting to 5.5 billion Islamic Dirham in paid-in capital (PIC) payable over 14 years commencing in 2023.
According to Fitch Ratings, this large increase in the bank's PIC is expected to support an increase in financing volumes over the medium term while preventing further increases in the bank's leverage.
As per the Cabinet decision, the Central Bank of Iran should make the money available using its own reserves.
The government last year submitted a bill to parliament regarding Iran's contribution to the sixth round of Islamic Development Bank's (IsDB) capital increase. The proposal is to help maintain Iran's position as the third largest shareholder of the IsDB, and increase its voting clout
Iran holds 8.25% of IsDB shares worth 4.174 billion Islamic dinars (ID) and is third after Saudi Arabia and Libya with 23.5% and 9.43% worth 11.896 billion ID and 4.771 billion ID, respectively.
Islamic dinar, a unit of account of IsDB, is equal to one Special Drawing Right of the International Monetary Fund. The composition of currencies in the SDR basket denominating in ID are the US dollar 41.9%, euro 37.4%, British pound 11.3% and Japanese Yen 9.4%.
In terms of voting power, Iran holds 387,734 or 8.40% of the total votes. It also has significant stakes in other IsDB Group entities and is among the top six borrowing clients of the IsDB Group financing.
According to the IsDB website, Iran currently has an overall portfolio of about $6.1 billion with the bank. The bank has funded 426 projects in Iran, 425 of which are completed. The bulk of the funds have gone into infrastructure, water sanitation, urban services and energy sectors. The development bank also caters to capital needs in agriculture, industrial and mining operations.
Founded in 1975, the IsDB is a large international financial development institute and one of the specialized institutions of the Organization of Islamic Cooperation (OIC) with 57 member countries.
IsDB's Member Country Partnership Strategies, which were launched in 2010, play an important role in formulating medium-term strategies and enhancing dialogue with key stakeholders in member countries and development partners, including Iran.
Khandouzi delivered a speech during a meeting over enhancing South-South partnerships for crisis resolution.
"The South-South dialogue and networking, along with the establishment of connections among centers of scientific and technological cooperation in countries, are essential to address the transformational challenges faced by Southern countries," Khandouzi said, highlighting Iran's establishment of an International Center for Scientific and Technological Cooperation as a hub for international technical collaboration with the potential for sharing knowledge and technology.
He emphasized the catalytic role that multilateral development banks, including those with predominantly Southern membership, can and should play in supporting South-South cooperation.
"These banks can adopt entirely new approaches and further develop existing strategies to expedite this vital process and steer it in the right direction.”
