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EghtesadOnline: CEO of the National Development Fund of Iran, the country’s sovereign wealth fund, has outlined the roadmap for the fiscal year that started on March 21.

Morteza Shahidzadeh stressed the need to direct NDFI resources more toward promoting the production sector and creating bigger maneuvering space for the private sector to boost manufacturing, the NDFI official website reported.

Shahidzadeh was alluding to this year's economic motto announced by the Leader of the Islamic Revolution Ayatollah Seyyed Ali Khamenei who billed the new Iranian year as the year of "enhancing production" to help shore up the sanctions-hit economy without relying on outside help. 

Shahidzadeh pointed to cooperation with the private sector to benefit from overseas funding and leveraging NDFI financial resources by tapping into foreign resources as a “robust” measure in the current year, according to Financial Tribune.

Leverage is an investment strategy of using borrowed money, specifically the use of various financial instruments or borrowed capital, to increase the potential return of an investment.  Leverage results from using borrowed capital as a funding source when investing to expand the asset base and generate returns on risk capital. 

Using NDFI resources for completing infrastructure projects related to exports is another plan to help boost domestic production.  The NDFI chief opined that the move can and will create jobs and improve the people’s welfare. 

He spoke about allocating a portion of the wealth fund's resources to increase working capital of industries and the agriculture sector, maintain current jobs and avert closure of the struggling production sectors.    

Recalling the economic circumstances, Shahidzadeh called for closer collaboration and support of agent banks to help private enterprise wrap up unfinished projects.

Financial resources of the NDFI are sourced from the oil export revenues. Following the worsening of economic conditions emanating from new US sanctions and the resultant decline in oil export, the Majlis decided to cut the share of NDFI from national revenues in the 2019-20 fiscal budget. 

 

Leaner Budget 

Accordingly, the share of NDFI from oil export revenues in the new budget was cut to 20%, down from 32% in the previous fiscal (2018-19) and 14% lower than the amount forecast in the Sixth Five-Year Economic Development Plan.

During the budget bill debate, MPs allowed the government to withdraw €2.37 billion from the fund in foreign currency for completing national projects in the ongoing fiscal. 

Almost half of this amount was allocated to boosting the defense power and the rest to a host of other projects such as water, irrigation, equipping workshops and laboratories and promoting the national broadcast media.

Withdrawal of funds from the NDFI requires authorization from the Leader. 

NDFI, which is independent of the government, was set up in 2011. The aim was and is to save money for future generations. Akin to wealth funds, NDFI lends to both public and private firms in need when government revenues are down, namely during low oil prices.    

The latest performance report published by the NDFI on its website shows that the fund allocated $14.7 billion in foreign exchange loans through 20 agent banks during the first half of previous fiscal (March-Sept 2018), which indicates 17.5% rise compared to the corresponding period a year ago. 

Funding national projects, including building refineries, petrochemical industries, steel sector, power plants, water projects near the border, and completing development plans envisioned in the Sixth Five-Year Economic Development Plan were among projects funded by the NDFI in the previous fiscal.

 

Iran NDFI National Development Fund of Iran Infrastructure sovereign wealth fund Manufacturing