Government debts to National Development Fund of Iran affect economy

Tehran, Iran, Oct.9

Trend:

The amount of advances obtained by the Iranian government from the National Development Fund of Iran is damaging economy and requires policy reform, said a member of National Development Fund.

Alireza Saedi spoke about the government financial relations with the fund and their effect on oil industry at the 5th Iranian Petroleum and Energy Club Congress & Exhibition, Trend reports.

"The oil revenues are divided in three parts which go to the government budget, the National Iranian Oil Company [NIOC] and the National Development Fund, but in reality, the fund's share returns to NIOC via budget," the official said.

"In current Iranian year [began March 21,2019], the government has taken $2.3 billion from the fund claiming that the advances are used for military costs," Saedi indicated.

"Meanwhile, if the advances were provided to private companies, it will have better results, as the private sector would return foreign currency revenues. However, this did not happen, and the problem is due to economic policies that make the fund resources available to public sector," Saedi added.

"The government has to change either the financial policy or monetary policy. In financial policy, we lack fiscal rules and, thus, the National Development Fund connection with government will be interrupted," he said.

"In line with monetary policy, any amount of foreign currency assigned to budget is exchanged to rial. The fund should convert 20 percent of its sources to rial that creates Dutch disease and interruption in monetary base," he indicated.

"The government's budget structure should be reformed and fiscal rules should be created. Then the fund can set up a subsidiary fund for stability; if we can plan and invest in foreign markets, we can help reduce the budget deficit," Saedi noted.

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