The National Development Fund of Iran, the sovereign wealth fund, is set to resume payment to the Capital Market Stabilization Fund, the CMSF head said.
In a talk with the Securities and Exchange News Agency, Amir Mahdi Saba’ie said both the NDFI and CMSF have reached a new agreement based on which the former resumes depositing money with the stabilization fund and reimburse past pending payments.
The CMSF was created in 2017 to help resolve the credit crunch in the bourse.
Giving money to the stabilization fund was suspended for a while over legal issues. Last week, managers of the two funds forged a new deal to settle the differences, the SEO News Agency reported.
“We reached a consensus on issues such as the time, terms and manner of payment to the stabilization fund,” Saba’ie was quoted as saying.
As per legal mandates, the NDFI should deposit the rial equivalent of $510 million with the CMSF in several phases. According to Saba’ie, the fund was supposed to deposit 6.5 trillion rials ($24 million) with the fund on a monthly basis but stopped payment after three installments worth 26.84 trillion rials ($122 million), paid intermittently.
Saba’ie said the NDFI has agreed to pay 13 trillion rials in pending installments.
Based on an earlier decision by the NDFI, the money is to be given as 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.
The allocation of NDFI resources to the CMSF is envisioned in the articles of associations of the fund but the plan was in limbo for years.
The NDFI has been given the go-ahead by the Supreme Council of Economic Coordination -- the ad hoc economic decision making body comprising three branches of power- to directly invest in the share market.
As per NDFI articles of associations, it can also invest in overseas financial markets. Following the top council’s ruling, the NDFI can broaden its investment scope and invest in the domestic stock market.
Investing in the bourse has often met opposition from the Central Bank of Iran because it is concerned about the negative impact of such moves on the monetary base.
NDFI foreign currency reserves are managed by the CBI and the bank says it is forced to keep the money printing machines running to pay the rial equivalent of NDFI loans.
