The National Development Fund of Iran, the sovereign wealth fund, has suspended payment to the Capital Market Stabilization Fund, the CMSF boss said.
In a talk with the Securities and Exchange News Agency, Amir Mahdi Saba’ie said funding was stopped over a legal quarrel.
The issue relates to preconditions set by NDFI managers who say they are willing to pay the CMSF shared of funds only after the Iranian National Tax Administration pays its debt to the NDFI.
“They want us to sign a new contract in which paying to the stabilization fund is contingent upon INTA clearing its debt to the NDFI,” Saba’ie said, arguing that INTA’s debt to the sovereign wealth fund has nothing to do with CMSF.
The CMSF was created in 2017 to help resolve the credit crunch in the bourse.
Form what is known, the NDFI must deposit the rial equivalent of $510 million with the CMCF in several phases. According to Saba’ie, the fund was supposed to deposit 6.5 trillion rials ($24 million) on a monthly basis but pulled back after the first installment in January.
Based on an earlier decision by the NDFI, the money is a loan at 12% to be repaid in five years, but the maturity date can be extended. The CMSF is responsible for paying the principal amount plus interest.
The allocation of NDFI resources to the CMSF is envisioned in its articles of associations but the plan was in limbo for years.
The NDFI was given the go-ahead by the Supreme Council of Economic Coordination -- the ad hoc economic decision making body comprising the three branches of power -- to directly invest in the struggling share market.
As per the NDFI mandate, it may invest in overseas financial markets, broaden its investment scope and invest in the domestic stock market.
Investing in the bourse has often faced opposition from the Central Bank of Iran on the premise that the bank is concerned about the negative impact of such moves on the monetary base.
NDFI foreign currency reserves are managed by the CBI and the CBI says it is forced to print money to pay the rial equivalent of the huge NDFI loans.
The CBI has often linked explosion of the money supply and chronic inflation largely to the controversial policy of governments to borrow from the NDFI while its forex assets are blocked in foreign banks due to the US economic blockade.
