The National Development Fund of Iran has collected $5.5 billion from the $7 billion unpaid by borrowers, the director of the sovereign wealth fund said.
“This was after protracted negotiations with borrowers over the need to clear forex debts,” Mehdi Ghazanfari was quoted by IBENA as saying.
“Now that almost 75% of the debt has been repaid, we are focusing on talks mostly with power plants sector to collect the balance,” Ghazanfari said. He expressed the hope that pending debt to the NDFI would reach less than $500 million before the yearend next March.
NDFI is independent of the government and was set up in 2011 to curb dependency on oil and save some of the earnings from oil and gas exports for future generations.
The fund lends to nongovernment public sector, private firms and cooperatives in need when government revenues are low.
“I am very satisfied with the repayment trend so far. In the past the [misplaced] thinking among borrowers and businesses apparently was that they had a right to subsidized debt ($1= 42,000 rials) regardless of the high and rising forex rates.
They were rather stubborn in their stance without realizing that their demand was hurting NDFI resources, the only wealth fund that belongs to more than 85 million Iranians and future generations.”
Up until recently, repayment of billions in forex loans taken years ago had become a hot button issue among private companies and the NDFI.
The latter insisted that the firms repay in foreign currency at present market rates while the former argued that they would pay at the same rate when they borrowed. The indebted companies referred to the unprecedented rise in currency rates plus galloping production costs that undermined their ability to repay.
Most of the unpaid loans belong to more than a decade ago when forex rates were much lower.
Ghazanfari said negotiations were held with the Tehran chambers of commerce, industries, mines and agriculture to find a solution to the debt problem.
“Eventually they were convinced and agreed to pull back in favor for the wealth fund and its future viability.”
“It is indeed fortuitous that henceforth companies will consider the [potential] risk of higher forex rates before taking loans. This should put an end to past hassles.”
Potential for Growth
The official noted that if the NDFI increases its domestic and foreign investment and promotes the role of financial and monetary markets, it could be better placed to grow.
“Global wealth funds have an average 6% returns. The NDFI’s returns over the past 10 years was zero. It is incumbent that we take effective measures to end mismanagement of the past and embark of ways and means that bring us closer to our goals.”
The NDFI has said that it now wants to focus on investing instead of lending. Its board of directors recently gave the wealth fund the go-ahead to do so.
Earlier this month, the deputy for NDFI Legal and Parliament Affairs said that the fund will be taking stringent measures, namely block bank accounts and seize property of borrowers in order to claim long overdue debt.
“Though over the past few months, debt collection has been picking up, yet, due to the economic and forex conditions, some banks and companies are not settling their loans. Therefore, the NDFI has decided to approach legal channels,” Fardad Amir Eskandari was quoted as saying.
The accounts of banks with the CBI whose customers have borrowed from the NDFI and are not repaying will be blocked and their assets seized, he said, adding that if that does not suffice the fund will confiscate bank shares and those of borrowers and guarantors as well as their collateral.
