The National Development Fund of Iran has injected 20 trillion rials ($125 million) to agent banks to help boost non-oil exports, a deputy industry minister said.
"The money was deposited with the Export Development Bank of Iran, Cooperative Development Bank, Agriculture Bank and Venezuela Bi-National Bank.
The banks are to extend loans to exporters of non-oil goods at 14.5% interest as a part of incentives aimed at boosting non-oil exports, Hamid Zadboum, was quoted as saying by Fars News Agency.
NDFI, which is independent of the government, was founded in 2011 as a sovereign fund for future generations when government earnings are high, especially from oil and gas exports.
Akin to wealth funds, it lends to both public and private firms in need when government revenues are down, namely during low oil prices – as is the case now.
Iran’s oil exports have declined sharply due to the new US economic sanctions. In recent years governments too have borrowed from the fund for emergency spending, like natural disasters and covid-19.
The official added that regulations guiding repatriation of forex earnings of export companies will not change
However, "Given the increase in global prices of goods and transportation costs, talks are underway with the Central Bank of Iran to revise currency commitments."
He did not go into details, but implied that the cumbersome currency repatriation rules should be rewritten to encourage non-oil exports and make the business attractive in the globally uncertain times caused largely by the coronavirus.
As per CBI regulations, export companies are required to sell at least half their earnings in the secondary market, known locally as Nima, at exchange rates below the (higher) rates in the open market.
Petrochemical exporters need to bring back at least 60% of their overseas earnings and sell it via Nima.
As per law, at least 20% of the total proceeds sold in the secondary market must be in cash. The balance can be used to import goods, machinery and equipment either by the exporting firm or any other third party.
Zadboom said in the current fiscal year (March 2020-21) China, India and Eurasian Economic Union States will be the main non-oil export destinations.
Domestic banks are often criticized for not allocating sufficient funds to exporters of non-oil goods. Reports in the past said whatever little they get from lenders barely meets 2% of their financial requirements.
Iran’s total non-oil trade reached 169.3 million tons worth $85.1 billion in the last fiscal year that ended in March, of which $41.37 billion constituted exports of non-oil goods.
Goods were exported to almost 128 countries, including 40 European, 21 Asian, 28 African and 12 in the Americas. The top export destinations were China with $9.04 billion, Iraq $8.99 billion and the UAE $4.5 billion.
