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    Posted June 19, 2011 by
    Utkanos
    Location
    Tehran, Iran

    More from Utkanos

    $200 Billion Of Iran's Currency Reserves Go Missing On Ahmadinejad's Watch

     

    See also "Newest Top 1000 List For IRI Officials' Bank Accounts":

     

    http://ireport.cnn.com/docs/DOC-606777

     

     

     

    (The following is aq translation of a BBC Persian broadcast. A link to the Farsi-language original can be found below.)

     

    TWO HUNDRED BILLION DOLLARS of Iran’s Currency Reserve Funds, up in smoke!!!

    BBC

    Kaveh Omidvar

    7 June, 2011

     

    Although  to date more than $200 billion have been injected into the  Currency Reserve Funds,  only a mere $15 billion is reportedly left  in the account.

    “Over $200 billion have  been deposited into the reserve funds out of which less than 10% has so  far been lent out to the private sector,” Fars News quotes Hossain  Ghazavi, Economic Vice President of the Central Bank, as having said.   Ghazavi adds that both the government and the Parliament have  consistently been withdrawing from the account, as “they’ve had no other  choice.”

     

    All surplus oil revenues are deposited  into the Reserve Funds, an account that was opened ten years ago, during  Mohammad Khatami’s administration.  Every year the government allocates a  certain budget for its annually determined price of oil and if the  year-end total sum of related revenues exceeds the initial projected  numbers; then the overage called “Surplus Income” is transferred into  these funds.

     

    The formation of this account was deemed  necessary following the late 1990’s oil price shock which led to a  severe drop in Iran’s oil revenues.  The decline in oil prices was the  major shock of the first 2 years of Khatami’s administration forcing the  government to build a shelter in order to safeguard against similar  circumstances in the future.

     

    The oil revenues took a huge  fall during Khatami’s early years, when those revenues in the upwards  of $19 billion in 1996 shrunk down to $15.5 billion by 1997.  The trend  continuing on pushed the ever decreasing revenues down to under $10  billion by the following year, setting the precedence for the ‘lowest’  revenues in the recent 32 years.

     

    Such uncertainty in oil  revenues that are the main driving force of Iran’s economy became the  determining factor for Khatami’s first administration to create a  special reserve fund for the surplus oil revenues in order to facilitate  a less treacherous passage through the potential future crisis of the  same nature.        

     

    One of the goals of the formation  of these funds was to combat the fluctuations in oil prices, however  the main goal was to provide loans for the private sector.   Approximately half of the surplus income was expected to go to the  private sector, when in fact only 10% was spent for that purpose,  according to Mr. Ghazavi.  And according to the Central Bank, about $15  billion of the Reserves have gone to the social development funds.

     

    Iranian Government’s Insatiable Appetite

     

    The  government was allowed to spend an approximate average of $15 billion  of the oil revenues per annum, based on the 4th government’s mandate.   However, almost the entire reserves which reached over $100 billion  during a number of years have reportedly been spent by the government.

     

    The  excessive expenditure of the oil revenues during the time of abundance  has resulted in an irregular expansion in the size of the government  and its budget and an overall rise in prices of goods, particularly the  non-exchangeable commodities; in other words: “the Dutch disease.” says  Mr. Ghazavi.  This excessive spending of the oil revenues and injecting  them into the society in the form of Rial, is the main reason for Iran’s  rising inflation and failing economy in the recent years, the economic  experts believe.

     

    It was this fate of the Currency  Reserves that triggered the plan to develop a new “National Development  Fund” as proposed by the Council on the Determination of the Regime’s  Welfare, in order to curb government access to the oil revenues.

     

    The  bill was later inserted into the fifth development plan with the  objective of preventing the government from easily resorting to these  funds for its daily expenditure.  The long term plan is to deposit 20%  of the annual export-oil revenues into this Fund.  According to Mr.  Ghazavi, in the event of another upsurge in the price of oils and oil  byproducts, the surplus revenues will once again get deposited into the  Currency Reserve Funds and then 50% of entire year-end balance of the  funds will be transferred to the National Development Fund.  Central  Bank’s V.P. adds that the National Development Fund will not immediately  supplant the Currency Reserve Fund and should the median price of oil  pass the $85 per barrel mark, the proceeds will go to the currency  funds.

     

    The board of directors for the new Nat’l  Development Fund has yet to be selected, however; according to law, the  President will be the chief director and the ministries of Finance,  Industry, Commerce, as well as the President’s Deputy Chief of Social  Affairs will be among the directors.

     

    The government will  no longer have the same unlimited access to the Currency Reserves as it  has always had.  Even the non-governmental section in charge of social  affairs will not be allowed a loan greater than 20% of revenues from  these funds.

     

    Portions of the Funds will be allotted to  loans that could facilitate the process of large scale development plans  and completion of unfinished smaller endeavors that have the potential  of generating currency, says Mr. Ghazavi.  Other portions will provide  financial support for Commerce and the investment funds in the market,  he adds.

     

    Finally, investments in international markets are also among the objectives of the National Development Funds.


    Pictured: SAC (Supreme Audit Court) bldg in Tehran


    Original:

    http://www.bbc.co.uk/persian/business/2011/06/110607_ka_currency_fund.shtml

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    *  [Translator's Note: In May 2009, SAC (Supreme Audit Court of  Iran)  reported that 1 billion was missing from Oil Stabilization Fund.  And Iranian President Ahmadinejad said: "the issue of the 'missing' $1  billion from the country's currency reserve fund is in fact an  "accounting error." ....... Mr. Ahmadinejad the joke's on you, as time  will tell..]

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