National Development Fund of Iran: Savings Estimation and Expected Scenarios

EPC | 27 May 2020

There is a significant disagreement in the estimation of the savings size of the National Development Fund of Iran (NDFI). The gap of this disagreement gets even wider between internal and external sources. According to reports released by the International Monetary Fund (IMF) in 2018, the Fund’s savings stand at 91 billion dollars. However, according to other reports released by the same institution in 2019, the size of the NDFI’s savings is 85.5 billion dollars. Estimates of internal sources appear to be completely different. While sources in the NDFI have announced that the government paid it 170 billion dollars as of 2013, the Research Centre of the Iranian Parliament underlined in a 2014 report that the former government sweeped the NDFI’s savings which, in that year, did not exceed 17 billion dollars. This is supported by figures released by the NDFI. On the other hand, official sources have indicated that the NDFI’s savings fell to nearly 22 billion dollars in September 2013, and subsequently to 12 billion dollars in October 2017.

This wide disagreement in savings estimates is perhaps attributable to the lack of transparency in the workings of the NDFI and its resources, the uncertainty about the mechanisms of their materialization, and the manner they are run. News refer to the failure of several parliamentary attempts to monitor the Fund and investigate its accounts. However, it is clear that the Iranian regime favours the continuity of the uncertainty surrounding the state of the Fund which plays a remarkable role in Iran’s resilience in the face of the economic pressures resulting from the sanctions. This makes it impossible to know the moment the Iranian economy will collapse since the size of the resources upon which it relies to show resilience in the face of pressures is also unknown. Therefore, it seems extremely important to estimate the size of the Fund’s real savings and the size of the share of those savings that the regime can use at critical times.

What is the National Development Fund of Iran?

The National Development Fund of Iran (NDFI) is a sovereign wealth fund that was established by the government of former Iranian President Mahmoud Ahmadinejad in 2010 after it dissolved the National Savings Fund. It is similar to another experience carried out by the government of President Mohammad Khatami in 1998. The NDFI constitutes a sovereign savings fund to save the surplus of yearly oil sales with a view to using them in years of low oil revenue, and to activate the private economic sector and some infrastructure sectors. Based on the five-year development programme, the Fund’s internal law foresees the deposit by the government of 20 percent of the total yearly international and domestic oil sales in the Fund, with an increase of 3 percent every year, in order to reduce reliance on oil in the general budget and save the sales surplus. However, governments did not show real commitment to increasing this percentage which made it sometimes stop at 20 percent.

The Fund carries out several functions, mainly: “giving loans to the private sector” and “injecting financial grants in infrastructure and development projects”. The Fund’s resources can also be “used in supporting the general budget in case of a deficit” resulting from oil sales or any deficit that needs to be closed using the Fund’s resources according to the Fund’s competent authorities. While Parliament and the Supreme Leader have the right to use the Fund’s resources for the last two functions, the Fund’s administration decides with respect to the first function.

The US Secretary of State Mike Pompeo recently referred to the Fund while talking about the corona crisis in Iran. He underlined that “Iran does not need international assistance to fight coronavirus as it possesses several resources, including a huge Development Fund whose savings are worth nearly 90 billion dollars”. Iranian President Hassan Rouhani had requested in a letter to the Iranian Supreme Leader to use nearly one billion dollars from the Fund’s resources to support the health sector in the face of the virus that is hitting the country.

All those events have led once again to raise a question that seems extremely important about the nature of that Fund and the real size of its savings, especially that the Fund plays a principal role in closing the general budget gaps (the size of reliance by this year’s budget on the Fund’s resources ranges between 3 and 7 billion dollars in several scenarios, accounting for between 7 percent and 16.5 percent of the general budget compared to last year when that reliance stood at nearly 18 percent). The Fund also plays a prominent role in supporting sovereign sectors, including the military sector.

The Fund’s expected revenue

Over the ten years since the inception of the NDFI, different percentages of deposits were mandated in the draft budgets for allocation by the government to the NDFI based on the state of the economy, the oil sales and government policies in dealing with the Fund’s resources. While the percentage based on the draft budget was 20 percent in 2010 and 2011, it was 23 percent in 2012, 26 percent in 2013, and 28 percent in 2014. However, the percentage declined again to 20 percent in 2015 and 2016 before rising to 30 percent in 2017 and 32 percent in 2018 to stabilize last year and in the current year at 20 percent. As far as the revenue from internal oil sales is concerned, draft budgets over the last decade allowed the government to use the Fund’s share in developing its programme to rationalize support.

Upon examining the Iranian oil sales over the last decade, it is noticed that Iran sold nearly 620.5 billion dollars’ worth of oil between 2010 and 2019, making the NDFI share at 147.5 billion dollars, based on the Fund’s average yearly share over the decade. With the addition of nearly 8.5 billion dollars (half of the remainder in the account of the National Savings Fund before its dissolution), the total would be 156 billion dollars. However, those calculations do not take into account some data that would reduce the estimates pertaining to the NDFI’s assets. Figures show that the government had consumed under an item in the draft budget the Fund’s share in the years 2015 and 2019 at the very least. On the other hand, official figures released by the Fund indicate that the Fund’s total savings in 2011 were less than 100 million dollars. This means that the government used nearly 25 billion dollars of the Fund’s resources in 2010 and 2011. Furthermore, sources in the research centre of the Iranian Parliament indicate that the total of the remainder in the Fund when President Rouhani came to power was 16 billion dollars only.

All this means that the Fund’s total income at its best ranges between 96.02 billion and 119.82 billion dollars.

Means of using the Fund’s resources

While the Fund circles indicate that the total loans, grants and assistance offered by the Fund over the past decade (2010-2019) amounted to 111 billion dollars, a look into the news and analysis of draft budgets reveals that most important among all those loans and grants were the ones offered between 2015 and 2019 since they were not returned to the Fund as per the Fund’s laws which offer a chance of up to seven years at least before the loans are repaid.

  • Figures indicate that the Rouhani government has consumed, with permission from Parliament or the Supreme Leader, nearly 33.02 billion dollars from the Fund’s savings within the budget support programmes, for different infrastructure, military and health sectors, or to deal with the crises that took place over the last three years (2017-2019) through 11 rounds of use of the Fund’s resources over those years. On the other hand, draft general budgets indicate that the government obtained two rial grants from the Fund (against dollar grants) in the total of 70 trillion tomans, equivalent to nearly 11.25 billion dollars from the Fund’s savings, making the total nearly 44.27 billion dollars.
  • In addition, Fund data indicate that its administration decided to offer nearly 37.2 billion dollars in loans to the private sector over the last five years which have not yet reached maturity based on contract durations. On the other hand, the total rial loans (against dollar loans) given by the Fund over the last five years reached nearly 46.2 trillion tomans, equivalent to 6.7 billion dollars, in addition to nearly 500 million dollars in accumulated loans that have not been repaid from previous years. This makes the total loans given by the Fund to the private sector over the last two years nearly 43.9 billion dollars.
  • In addition, official Fund data indicate that the NDFI allocated nearly 6.06 billion dollars of its balances in 2018 and 2019 to the so-called dollar investment in banks. This means that they were given to importers of goods as guarantee for them in international banks. There was no mention of repayment of those debts to the Fund.

Based on all the above, the Rouhani government has withdrawn between 88.17 billion and 94.23 billion dollars from the Fund’s resources over the last two years within the framework of its development programmes, support for the economy, closure of general budget deficit, and offer of loans to the private sector in major projects. This makes the remainder of the Fund’s resources between 25.59 billion and 19.53 billion dollars.

General conclusions

  1. The NDFI constitutes one of the most important sources relied upon by different institutions of the political regime in Iran for supporting the economy and supporting infrastructure and development projects in the country. Over the last few years, it has also constituted one of the most important sources relied upon by the government in its general budget as one of the resources of the general budget and one of its most important sources in closing the deficit.
  2. The NDFI plays a significant role in supporting the resilience of the Iranian economy in the face of pressures resulting from the sanctions, as one of the main sources that can be relied upon by the Iranian economy. While the government and the regime’s institutions attempt to pretend that they do not resort to the Fund’s resources within this framework, upon examining the data, it has become clear that the government resorted 13 times over the last 25 months to the Fund to consume more than 44 billion dollars of its resources to bridge the gaps stemming from the pressures of sanctions on its ailing economy.
  3. The uncertainty surrounding government statements about the Fund’s savings prevents an accurate knowledge of the size of those savings. It is noticeable that the official quarters in Iran favour the continuity of this uncertainty by refraining from officially announcing the size of the Fund’s savings and tending to make contradictory statements in this respect. Most probably, the uncertainty and contradiction in official statements about the size of the Fund’s savings are calculated steps that aim to mislead international circles about the real size of the Fund’s savings.
  4. In view of the huge gap between the estimates of international organizations about the size of the Fund’s savings and the statements issued by the Fund’s administration, an accurate monitoring of the figures and of the Fund’s internal regulations reveals that the figures released by the international organizations, although correct in terms of the size of the Fund’s revenue, remain overestimated because they do not take into account the consumption of the Fund’s resources in supporting development programmes and supporting the budget. They also do not take into account that nearly 43.9 billion dollars of the Fund’s resources cannot be relied upon because they remain restricted resources under the Fund’s laws that deposit those resources in bank balances against loans to the private sector until those loans are repaid. Upon taking those two points into account, both the actual resources and the resources available to the Fund would be much lower than what is stated by the international sources, and are closer to the positions declared by officials in the administration of this sovereign fund.
  5. Lastly, in case the sanctions imposed on Iran persist for another year, in addition to other economic developments, mainly the decline in oil prices and the pressure resulting from the spread of coronavirus, and in case the government attempts to meet its needs in the general budget and support the private sector at the same previous pace, the remaining resources in the NDFI are not expected to meet the needs (which could be considered one of the reasons of the opposition by the Supreme Leader to government requests to use the Fund’s resources). This amounts to an empty Fund (because no new amounts are deposited in it as a result of the decline in oil sales and the possible repetition of last year’s experience in terms of largely depleting the Fund’s resources in closing the budget deficit).


First scenario: resort by the regime to the Fund: the government is assumed to resort to the Fund’s resources in the current year to close the budget deficit and carry out some development projects. Revolutionary establishments also resort to the Fund’s resources to support sovereign sectors, including the military and nuclear sectors. Assuming that the expectations regarding the deficit rate are realistic, this means that the government will have to use 10-15 billion dollars from the Fund’s resources to close the deficit and bridge some other gaps in the general budget. Upon this assumption, the scenario expects that work will halt in infrastructure and sovereign projects in the oil, petrochemicals, water resources and agriculture sectors both this year and next year. A decline is also expected in the Fund’s resources to below the level that can be used to support the economy and the government next year (less than 10 billion dollars).

Second scenario: opposition by Khamenei and Parliament to resort by the government to the Fund: this is the scenario most likely in light of the developments. Revolutionary, sovereign and legislative institutions are assumed to oppose the government’s resort to the Fund’s resources to close the deficit in its budget. Within this framework, the Supreme Leader will oppose giving the government permission to use the Fund’s resources, except in some sensitive sovereign sectors, such as the military sector. Parliament will also oppose authorizing the government to dispose of the Fund’s resources. These two steps are totally expected in light of Khamenei’s recent manoeuvre in opposing the government’s request to resort to the Fund’s resources to support the health sector, and also in light of the dominance of conservatives over Parliament, which makes it opposed to the government’s decisions in this respect. At the government level, the scenario expects that the government will tend to take alternative steps to close the budget deficit, through the sale of more securities, exhausting the stock exchange capacity and, lastly, implementing an austerity policy that would deprive the private sector of a large proportion of the Fund’s loans, and putting pressure on the Fund’s debtors to repay their debts. In this case, the government can be assumed to be able to maintain the Fund’s resources as they are until the end of the current year. This does not imply in any way that the Fund’s resources will increase, taking into consideration the possibilities resulting from the austerity policy that will be implemented by the government and the possible incompetence of the Iranian stock exchange in securing the new monetary resources needed by the government to close the gap in its budget.

Third scenario: increasing the Fund’s income sources: the scenario assumes that the government would be able to increase the Fund’s resources in the current year through repayment of due debts, including the Fund’s share in the internal oil sales for 2018 and 2019, and putting pressure on the private sector to repay its dates, in addition to refraining from depleting the Fund’s resources during the current year based on the second scenario. Nevertheless, this scenario remains weak in light of the economic developments, the continued sanctions imposed on Iran and the fall in oil prices which would make the government incapable of increasing the Fund’s resources. It would also make the private sector incapable of repaying its debts to the NDFI.

Generally speaking, it can be said that competition will be between the first scenario that is supported by the reality in terms of the government’s behaviour and real developments at the economic level, including the pressures stemming from the sanctions, the pressures stemming from the decline in oil prices, and the corona crisis, which would force the government to resort to the Fund’s resources to ensure resilience in the face of the storm, and the second scenario, supported by the government’s will and desire to rely on other sources (such as employment of the stock exchange capacity in the sale of non-profitable government assets and the sale of more securities) to support its general budget. However, those steps remain unguaranteed and liable to fail. They would also have a severe economic and social impact on the Iranian society. Eventually, however, those steps cannot be pursued for a long time.

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