Senior financial and economic officials found flaws with the functioning of the National Development Fund of Iran and underscored the need to improve its efficiency.
One of the main concerns is the government(s) overreliance on loans from the NDFI in recent years to cover its budget deficits.
Speaking at a “Conference on Sovereign Wealth Fund and Intergenerational Justice”, Mehdi Qazanfari, the NDFI chief criticized the way government officials approach the fund and its mandate.
“We have no mandate to [help] compensate government budget deficits. We are not a bourse nor a bank to be solicited whenever administrative bodies need money,” local media quoted him as saying.
He recalled an instance when one minister approached the NDFI for 250 trillion rials ($830 million) last year, highlighting shortfalls in the national budget planning.
To help fund government needs, he proposed that financing should be based on investment returns of the NDFI and not by only asking for its financial resources.
“Governments must allow us to get involved in economic activity and invest money and give them the profit instead of lending money,” he told the conferees.
NDFI is independent of the government and was set up in 2011 to curb dependency on oil and save a, part of oil and gas export revenue for future generations.
The fund lends to nongovernment public sector, private firms and cooperatives in need when government revenues are low, namely during declining crude oil prices in the international market and when the government is not capable of selling crude oil due to foreign sanctions as is the case now.
An estimated $136 billion has been injected into the fund since its inception -- half of it in the first three years of its operation.
Qazanfari said the government is the biggest debtor to the NDFI with arrears exceeding $60 billion, reiterating the clear need to save resources for future generations.
As per law, 80% of NDFI resources should be used to fund private sector projects with non-governmental public entities taking the rest.
Due to shrinking oil revenues thanks to the US sanctions, financial resources of the fund have declined while governments have increasingly tapped into NDFI resources in recent years to plug their budget holes.
Government role in and dominance over NDFI resources was a subject of concern for the head of the economic commission of the Majlis, Mohammadreza Pourebrahimi.
Voicing the complaints of economists and experts, he recalled that the lion’s share of NDFI loans have always been given to governments and their affiliates.
“The government accounts for 65% of NDFI loans. Nongovernment public entities get 25% and only 15% remains for the private sector,” he said.
Unpaid Forex Loans
The Governor of Central Ban of Iran Ali Salehabadi took the stage and spoke about the critical need for borrowers to repay forex loans.
He pointed to the role of banks in helping the NDFI recover non-performing forex loans. “It is important for banks and the NDFI to collaborate to recover bad loans to pave the way for new lending,” he said.
To help the NDFI reduce NPLs, the senior banker said its loans must be go to businesses that generate foreign currency.
It is known that forex loan defaulters fail to meet their commitments due to a combination of factors, namely the prohibitive rise in currency rates, the US economic blockade and rising production costs.
Most of the unpaid loans were borrowed years back, when forex rates were much lower, causing borrowers to withhold settlement now because of much higher currency rates.
O several occasions they have asked the NDFI to calculate their debts either at the same rates when they borrowed or at the least accept the rial equivalent of their debts. The NDFI threw out both requests.
CBI data show that non-performing forex loans far outweigh arrears in the national currency. Accordingly, the NPL ratio was 13.2% for forex loans as of Dec. 21, posting 5.6% increase on the same period a year ago.
