Iranian President Hassan Rouhani has appointed Safdar Hosseini, a former minister of economy in the Mohammad Khatami administration, as the new managing director of the National Development Fund (NDF). This appointment was welcomed by members of parliament that insist on reducing the government’s control over the fund and returning this important institution to its original mission: to translate Iran’s underground wealth to over-ground investments. The change of guards has also led to a debate about the fund’s performance since its inception.
The rethinking process on how to manage Iran’s oil-export revenues started more than a decade ago. The new approach was initiated in the early 2000s by former President Mohammad Khatami, who introduced the Oil Stabilization Fund (OSF) as a mechanism to compel the government not to allocate all oil-export revenues to current expenditure. In the new system, only a budgeted amount of oil revenues would flow into the treasury with the surplus allocated to the OSF for strategic investments to spur economic growth, including loans to the private sector. In July 2005, when Khatami passed on the government to his successor, Mahmoud Ahmadinejad, the OSF had a balance of $14 billion. However, the Ahmadinejad government, which came to an end this year, managed to misappropriate the OSF by utilizing its resources for ongoing government expenditure, especially in financing the shortfalls of the subsidy reforms it initiated in 2010. In early 2011, the Iranian media reported that the OSF balance stood at zero, a statement that was later confirmed indirectly by government officials.
