President Ebrahim Raisi has called for expediting the process of practical support for the struggling stock market by the National Development Fund of Iran, the sovereign wealth fund.
Speaking at the Government Economic Coordination Headquarters late on Tuesday, Raisi called for “precisely implementing plans” to use NDFI loans to bolster the bourse, president.ir reported.
He was referring to measures approved by the GECH headed by former president Hassan Rouhani to help bolster the stock market saddled with falling share prices and near permanent outflow of capital by nervous investors. Most decisions of the past administration have not yet come into force.
Among other things, the NDFI was supposed to deposit 1% of its financial resources with the Capital Market Stabilization Fund. Allocation of the NDFI resources to the CMSF is envisioned in the articles of associations of the fund but the plan is in limbo for years. The CMSF was created in 2017 to help resolve the credit crunch in the bourse.
The NDFI has been given the go-ahead by the Supreme Council of Economic Coordination- an ad hoc body comprising the 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.
Such decisions have often been opposed by the central bank as it is concerned about the potential negative impact of such moves on the monetary base.
NDFI foreign reserves are managed by the CBI and the regulator has complained that it is forced to print money to pay the rial equivalent of the NDFI loans.
The CBI has often linked the ballooning money supply and galloping inflation in part to the controversial government policy to borrow from the NDFI while its forex assets are blocked in foreign banks due to the US economic blockade.
The CBI pays the rial equivalent of currency withdrawn from the NDFI. This is tantamount to creating fiat money simply because the overseas forex is inaccessible due to tough US restrictions since 2018 on money transfer to and from Iran.
Independent of the government, the NDFI was founded to save a portion of forex earnings from oil and gas for future generations.
As another move to lift the share market, CMSF could be allowed to sell bonds worth 200 trillion rials ($740 million) that will be guaranteed by the government.
The share market has been grappling with bearish trend that began after the price bubble burst in summer 2020 and nervous investors rushed for the exits. The pattern continues to this day.
