Head of the Iranian Privation Organization is skeptical about the government’s ability to realize projected income from selling its shares in state-owned companies as forecast in the March 2022-23 budget.
As stipulated in the budget, the Raisi administration expects to generate 710 trillion rials ($2.4 billion) from selling shares in several state entities.
Recalling the poor performance in monetizing the remaining stake in listed companies in this calendar year, Hossein Qorbanzadeh said the “government’s projected income next year will likely not be realized.”
Income from selling shares “is not a sustainable source like tax revenue,” he said, noting that diverse factors impact the realization of projected incomes in each budget.
One hurdle impeding the divestment of shares owned by the government is that in many cases the targeted companies have put the shares as collateral with banks to borrow.
The government for long has sought to fully privatize some big companies and cede its remaining stake. The National Iranian Copper Industry Company, Mobarakeh Steel Company and the main automakers Iran Khodro (IKCO) and SAIPA are some big names in which the government still has shares.
According to Qorbanzadeh, except for three banks in which the government is a shareholder, its shares in the abovementioned companies are presently are held as collateral in banks and out of the IPO’s privatization agenda, for now.
Government income forecast from privatization schemes next year is 25% or 240 trillion rials ($830 million) lower than in the present year.
Tall Order
The buoyant climate in the stock market in the first half of the last fiscal year tempted the former government to project an ambitious 950 trillion rials ($3.2b) in revenue from selling shares in the present fiscal year.
A year before, the government had said it would make 115 trillion rials ($395m) in such revenue, but that amount was far beyond reach as the government tapped into the historical bullish run in the share market in the first half of fiscal 2020-21.
Total government income from selling shares exceeded 320 trillion rials ($1.1b) that year. Most of the earnings were from selling shares in big companies via two exchange-traded funds. The government also resorted to retail sales of shares.
With the stock market in crisis the government’s ability to fulfill its income aims has visibly been hurt.
As per available data, revenue from selling state-owned assets was almost zero in the first half (March 21-Sep 22) of the fiscal year, according to a report by the Supreme Audit Court (SAC), the supervisory arm of the parliament.
Among major companies on the divestment list are Pars Agro-Industry & Animal Husbandry Company, Esfarayen Industrial Complex, Wood, Metal, Plastic and Electronic Industrial Complex (Sima Choob), South Aluminum Corporation (SALCO), Hegmataneh Petrochemical Compnay, Shahid Abbaspoor Dam & Power Plant Operation & Generation Company, Yazd Meat Company and the Iranian Catalyst Development Company.
