• Business And Markets

    Contribution to IDB Capital Increase Proposed by Gov’t

    The government on Tuesday submitted a bill to parliament regarding Iran's contribution to the sixth round of Islamic Development Bank's (IDB) capital increase. 

    According to Mohammad Hosseini, vice president for parliamentary affairs, the proposal is to help maintain Iran's position, as the third largest shareholder of the IDB, and increase its voting clout in the board of directors, newswires quoted him as saying. 

    The bill was approved by the Cabinet and must become law to be implemented. 

    In 2020, the IDB 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 will pay the contribution using its own reserves.

    Iran holds 8.25% of IDB 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 IDB, is equal to one Special Drawing Right of the International Monetary Fund. The composition of currencies in the SDR basket denominating in ID are United States 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. Iran also holds significant stakes in other IDB Group entities and is among the top six borrowing clients of the IDB Group financing.

    According to the IDB 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 project funds are concentrated in infrastructure, water sanitation, urban services and energy sectors, but the development bank also caters to capital needs in agriculture, industrial and mining operations.

    Founded in 1975, the IDB is a large international financial development institute and one of the specialized institutions of the Organization of Islamic Cooperation with 57 member countries. 

    IDB'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.