Iran Plans To Take More Money From National Reserves
Maryam Sinaiee
Iran International
Iran’s government is again planning to take money from the National Development Fund (NDF) to finance its budget next year, as sanctions have cut its revenues.
Iran International
Iran’s government is again planning to take money from the National Development Fund (NDF) to finance its budget next year, as sanctions have cut its revenues.
The government’s plan is to slash in half the amount of money from oil sales which is supposed to be saved in the NDF and spend it on its operations.
According to the charter of the National Development Fund, 40 percent of oil revenues next year should be saved by the government in the fund for investment on productive economic activities that would guarantee the welfare of future generations. NFD is a sovereign wealth fund.
Now, the budget bill presented to parliament on December 12, proposes to save only 20 percent of oil revenues and transfer the other 20 percent to the government.
At the time of its establishment, the fund's share from oil revenues was 20 percent to be increased by 3 percent annually until the end of the Fifth [five-year] Socio-Economic Plan in 2016. The fund's share from oil revenues increased to 30 percent with a 2 percent annual increase during of the Sixth [Five-year] Socio-Economic Plan.
"What has happened in reality, however, is [various] administrations' request to pay less into the fund and to take hold of the rest [of the money destined for the fund] as [US] sanctions grew stronger and oil revenues fell," the Iranian Students News Agency (ISNA) wrote Sunday.
Another problem with this scheme is that Iran might not be able to repatriate all the oil revenues because of US banking sanctions, which means the NDF money the government wants to spend will not enter the country as hard currency. Economists say that in such a case, borrowing from the fund would mean printing Iranian rials and spending it in the country, further fuelling inflation, which now stands at the annual rate of 45 percent.
Since its establishment in 2000 as a currency reserve fund, all administrations have borrowed from the fund for various purposes, including 2 billion euros in 2019 to increase the military's budget. The administration of President Mahmoud Ahmadinejad borrowed heavily from the fundwhich had been handed over to him with over $24b, including $2.7b to pay New Year cash handouts to all Iranians in 2013.
In 2008 the government of President Ahmadinejad classified information about the fund. In 2013, the newly elected President Hassan Rouhani said the fund had completely been drained by his predecessor's government. There is currently no concrete information on the fund's assets, but it is clear billion were withdrawn since 2018 when the United States abandoned the 2015 nuclear agreement and imposed sanctions.
The amount that the Raisi administration intends to borrow, half of the fund's share, will be the largest percentage ever drawn from the fund.
Withdrawing, or borrowing, from the fund requires the approval of Supreme Leader Ali Khamenei.
In 2020, Khamenei did not approve the Rouhani administration's request to slash NDF’s share from oil revenues and add it to its budget revenues.
The data is based on payment information across the government between March and November 2021.
Meanwhile, a conservative daily in Tehran, the Jomhouri Eslami newspaper, wrote on Sunday, December 19that the gap between minimum wage and hefty salaries for certain managers can lead to a catastrophe.
The leaked data, published by the conservative news website Alefindicates that minimum wages across the Executive, Judiciary and Legislative bodies, as well as Supreme Leader Ali Khamenei's office, and other government institutions is fixed at a flat 32,550,000 rial rate, or a little over $100 a month. The purchasing power of $100 is a little bit more in Iran than in Western countries, but still a family of 3 cannot afford the bare necessities with that amount of money.
However, the highest earning personnel at those entities receive salaries at different levels. The monthly salary of the highest paid government employee in Iran at the executive branch is 2.84 billion rials, or around $10,000. This is followed by 1.84 billion rials at the judiciary branch and 830 million rials in the legislative branch, and 485 million rials at Khamenei's office.
These salaries include workers and managers at state-owned industries, which are mostly money-losing enterprises.
Alef quoted Vice President Meysam Latifi as saying that high earners receive up to 62 times more salary than the low earning government personnel, although the difference is closer to 100 times.
Jomhouri Eslami wrote that the highest salaries at the executive and judiciary branches should no longer be called "astronomical salaries," as these are "super astronomical figures."
The official poverty line in Iran is drawn just under 100 million rials per month. However, most low-paid workers earn around or less than 40 million rials per month and manage to survive in a mysterious way.
Iranian media have been reporting that meet, fruits and dairy products are now consumed regularly only by a minority and consumption of these food staples have decreased up to 50 percent.
According to Jomhouri Eslami, a maximum of 10 percent of the employees receive the highest payments in the range while the other 90 percent fall below the official poverty line. Meanwhile, the high earners are those who receive separate allowances for housing and transportation while low earners have to have another job after their first work to make ends meet and most of them are tenants.
The high paid employees are usually well-connected individuals who have access to extra legitimate or illicit incomes if they are part of the financial corruption network in the country.
Jomhouri Eslami wrote that the existence of shanty towns next to luxurious buildings in most parts of Iran is indicative of a vast class difference which is getting wider by the day, while the government seems to have no plan to bridge the gap in any way.
The daily wrote, "Although the society looks calm on the surface, there are alarming signs hiding under the skin. There is a limit to the people's patience and if it ends, the gathering storm will eventually arrive to trigger explosive changes that will sweep aside everything and everyone. This means if there is going to be a revolution, it is likely to be one by the barefoot people against an aristocracy that earns astronomical salaries and has access to the cash coming out of corruption."
The daily warned: "This is something that is most certainly likely to happen if the current situation continues."