Iran Passes New Regulations to Facilitate Foreign Finance
EghtesadOnline: The government’s Economic Council has passed a new set of regulations with the aim of facilitating the approval of foreign finance for all eligible local applicants.
According to the recent regulations, the process of assessing the applications of executive bodies to use foreign finances for issuing letters of credit will be handled in the Central Bank of Iran within two months of the submission of the application, Fars News Agency reported.
Following CBI’s assessment, the applications will also be vetted by a commission from the Economic Council headed by First Vice President Es'haq Jahangiri. This is while CBI is obliged to consider the country’s foreign exchange policies during the assessment process.
The Planning and Budget Organization will check the applicants’ documents to see if they are complete. The organization has 45 days for this process and after that it should present the applications in the government’s Economic Council for final approval, Financial Tribune reported.
The new regulations are aimed at streamlining the process for executive bodies’ applications to use foreign finance for implementing their proposed projects.
The new framework also seeks to create an integrated system to ease the process of examination, compilation and preparation of the final report by the government’s Economic Council.
Therefore, any executive body that plans to utilize the allocated foreign finances needs to fill the applicants’ form in line with the following regulations.
According to the directive, the applications must be signed by the highest executive authority in the organization and then be sent to the Planning and Budget Organization for further assessment.
Meeting the Standards
According to the first article of the new directive, ministries, state-owned companies and executive bodies under the protection of Public Accounting Law are considered eligible to use foreign funds.
The article also notes that the banks or credit institutions that provide foreign finances have no control over their usage so it is not responsible for the profitability of the project, rather the bank that has guaranteed the repayment of the loans will have to ensure their profitability.
Article 2 of the directive urges all the executive organs to only send in projects that are technically, economically and financially viable.
It also emphasizes that the repayment of the original sum of credits plus the interest, insurance and additional costs should all be provided from the gains of the proposed project while the total costs of their implementation should not exceed a set ceiling.
One clause states that "if a project is not financially justifiable but was deemed eligible in the annual budget to receive foreign finance can benefit from the credits only after going through the process mentioned in the directive".
Article 4 obligates all the executive bodies to explain the expected benefits of their proposed projects in the applications they send to the council's secretariat. The application should be signed by that organ’s highest authority.
According to Article 5, before a body submits its application to the Planning and Budget Organization, one of the banks selected as the agent bank for allocating foreign finances should have agreed to finance the project.
Article 6 states that executive bodies should only propose projects for using foreign finances, for which they are able to provide the prepayment sum, equal to what CBI’s regulations dictate.
Article 7 states that "observing environmental standards and acquiring licenses from Department of Environment and presenting them to the Economic Council's secretariat with the application is mandatory for all applicants".
Article 8 states that "all the applicants seeking foreign finances must act in line with Article 20 of the Sixth Five-Year Development Plan and the law of maximum utilization of production capacity to meet the needs of the country and enhance exports".
"Among the projects that have technical, economic, financial and environmental feasibility, the priority will be with those that have higher foreign exchange income," a following clause stated.
Iran recently managed to finalize a stream of foreign finance deals with countries ranging from Europe to East Asia. The latest finance deals included the €1 billion finance deal between Austria’s Oberbank and the €500 million agreement with Denmark’s Danske Bank.