The Supreme Leader has agreed to the transfer of four billion dollars from the National Development Fund of Iran (NDFI) for use in the proposed budget for the next Iranian calendar year, 1397, which starts on March 21.
On January 23, Ali Asghar Yousefnejad, the spokesman for the parliament’s Budget Reconciliation Committee, announced the decision [Persian link], which will see increased spending on disaster relief, environmental damage and disease prevention. At the same time, it allows for increased spending on defense and state-run media, leading to accusations that some of Iran’s most powerful institutions are reaping benefits to which they are not entitled — simply because they are powerful and because the Supreme Leader wants to bolster their efforts.
NDFI was established on January 5, 2011, as a sovereign, non-governmental fund to direct a portion of oil and gas revenues towards productive, sustainable investments, and to preserve “funds for future generations without doing harm to the current one.”
When the fund was established, it received 20 percent of the revenue from petroleum exports, to be increased by two percent each year. In 2015, its share of oil and gas revenue was set at 30 percent. Over the next Iranian calendar year, 36 percent of Iran’s petroleum revenue will be deposited into the fund.
The president of the Islamic Republic is the chair of the fund’s Board of Trustees , and rest of the board is comprised of five members of the cabinet, the governor of the Central Bank of Iran, the secretary of Iran’s Chamber of Cooperatives of Commerce, Industries, Mines and Agriculture, two members of the parliament and the country’s prosecutor general. The bylaws of the fund stipulate no official role for the Supreme Leader but, according to an unwritten rule and following the precedent set when the Fifth National Development Plan was drawn up in 2009, the government seeks his permission to spend the fund’s reserves and members of the parliament act as the fund’s clients.
According to Yousefnejad, Ayatollah Khamenei has authorized the following allocations of the funds’ money: $2.5 billion to bolster defense; $150 million to Islamic Republic of Iran Broadcasting (IRIB); $100 million for the reconstruction of areas hit by earthquakes and floods; $100 million for two nationwide vaccination projects; $350 million for water projects in the drought-stricken province of Sistan and Baluchistan; and $150 million to deal with dust storms.
The areas earmarked for increased funds are not surprising. But what has surprised some politicians is what has been left off the allocation list. Reformist member of parliament Mahmoud Sadeghi tweeted [Persian link] that the original proposed budget had allocated $1.006 billion to help settle accounts with retired teachers, but that this item has now been removed. Other items removed from the proposed budget include funds for public transportation, railways and for MokranDevelopment Organization, which was due to develop neglected coastal regions in southeastern Iran along the Gulf of Oman and the Persian Gulf. Instead, the military defense allocations have been increased from $1.3 billion to $2.5 billion and the budget for IRIB has jumped from $100 to $150 million.
The charter of NDFI clearly specifies how funds can be spent — and the military and the IRIB do not feature on its list of appropriate recipients. Likewise, the Fifth Development Plan declares its overall goal to be the provision of help “to private, cooperative and general non-governmental sectors to expand production and investments both inside and outside Iran.” And the Sixth Development Plan, passed in the summer of 2015, emphasizes that the funds of the National Development Fund must be kept separate from budget obligations and only be granted to non-governmental sectors.
*Is the Missile Program “Development”?*
Under these guidelines, the non-payment of bonuses to retired teachers is logical, but other allocations authorized by Ayatollah Khamenei — be it for the missile program or dealing with dust storms — are not compatible with the declared goals of the fund. In fact, this fund has now been turned into a piggy bank for ensuring a key part of oil and gas revenue is directed toward powerful institutions, which can spend the extra funds as they like. Iran’s military was powerful enough to double its share and IRIB had enough clout to increase its take by 50 percent. The Ministry of Education, on the other hand, lacked influence so it lost its share.
The distribution of the funds clearly shows that entities favored by the Supreme Leader received the lion’s share of the money. In other words, Ayatollah Khamenei did not “authorize” who gets what, but he did decide where the money would go.
The government and members of the parliament are equally guilty of institutionalizing this abuse of NDFI funds. Occasionally, when they cannot force the government to allocate funds for what they want it to be spent on, they pressure NDFI to provide the money. And the government, when it does not want to give money to certain entities, does the same thing.
Perhaps one of the most significant aspects of the way the National Development Fund operates is the fact that when the Sixth Development Plan was announced in 2015, Khamenei ordered that the bank account belonging to the fund must become independent from the Central Bank so as to limit the government’s interference. But, instead of government interference, the allocation of NDFI’s funds in the next year’s budget shows that this account is actually controlled by the Supreme Leader — not by its board, not by the parliament and not by the government.