The Iranian government is providing new short-term incentives to prop up non-oil exports to reduce dependence of crude oil sales for foreign exchange revenue.
First Vice President Es'haq Jahangiri unveiled a stimulus package to boost non-oil exports on Tuesday in line with Iran's shift in economic policy, IRNA reported.
The shift from an inward-looking state economy to an export driven economy is seen as the only credible option in the coming years.
The new stimulus package will be financed and carried out by the National Development Fund of Iran, the government's budget and state-owned banks. Iran's Trade Promotion Organization, affiliated to the Ministry of Industries, Mining and Trade, will coordinate the package's implementation that involves NDFI, banks and exporters.
The NDFI will deposit $1 billion in foreign exchange deposit accounts with designated banks for two years. The sum can be increased to $2 billion, if necessary.
The money will be used to lend to foreign buyers of Iranian goods and services at a maximum interest rate of 3.5% per annum.
The government hopes the loans would give Iranian goods and services an edge over their foreign rivals in export markets.
Furthermore, the NDFI will set aside 20 trillion rials ($577 million at market exchange rate) for a year to support lending by Export Development Bank of Iran, Sepah Bank, Bank Saderat Iran, Keshavarzi Bank and Bank of Industries and Mines.
The banks will lend to agricultural sector and knowledge-based industries at 14%. The lending rate to industrial plants will be higher at 16%. With current lending rates hovering near 25%, these loans will be considerably subsidized by the government.
The NDFI will also deposit foreign exchange with banks to increase lending to exporters of goods and services. Foreign exchange loans will be provided on condition they are not converted to rials.
TPO may provide banks with a list of valid exporters who would be eligible for loans. However, banks will not be limited to TPO's list. The criteria for TPO's list is uncertain.
To keep track of the lending and ensure the funds end up where they are supposed to, the NDFI will review each bank's operations every two months. The fund will then decide how much more will go to each bank based on their performance in those two months.
The Central Bank of Iran will also help these banks along. Some may get their reserve requirements—money banks are mandated to deposit at the central bank—cut, unlocking more money for them to lend.
The government will also use 9 trillion rials ($259 million) of its budget, for lending to exporters. The plan, however, goes further than providing cheap money.
Exporters who expand their trade will get cash awards as well. TPO will also create a group to counter fraud and misuse of government funds.
