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    Gov’t taken 70% of cash in state-run pension funds

    March 17, 2017

    The government has walked off with 70 percent of the funds in state-run pension funds, the deputy minister of cooperatives, labor and social welfare, Hojjatollah Mirzaei, has acknowledged.

    The government has been raking in the pension money as forced loans for several years in order to help balance its annual budgets.  It has also balanced the budget by forcing the banks to make loans to the government and by neglecting to pay bills submitted by contractors

    Addressing a press conference earlier this month, Mirzaei said the government owes the pension funds around 1,650 trillion rials ($43 billion).  That is 70 percent of their assets on paper, the Financial Tribune reported.

    The deputy minister said the retirement age in most other countries is between 60 and 65 whereas in Iran people call it quits at the prime age of 40 or 50.

    Based on international standards, the ratio of pensioners to the workforce should be 1:6, whereas in Iran pensioners outnumber contributors by 1:0.9 or 1:0.5, according to Mirzaei.

    He cited a Majlis-passed proposal to make women eligible for pensions after 20 years of work regardless of age and said the bill was rejected by the Guardians Council—the oversight body that reviews legislation to ensure compliance with Iran’s Constitution and Islamic law—because it was against the principles of the Resistance Economy, the Supreme Leader’s economic policy.

    Mirzaei believes that, if executed, early retirement for women would have imposed additional expenses of 50 trillion rials ($1.3 billion) on the Civil Servants Pension Fund and 300 trillion rials ($7.8 billion) on the Social Security Organization.

    Four of the country’s 18 pension funds operate under the auspices of the Mirzaei’s Ministry of Cooperatives, Labor and Social Welfare. They are the Civil Servants Pension Organization, the Iranian Social Security Organization, Iran Steel Pension Fund and Farmers, Villagers and Nomads’ Social Insurance Fund.

    “In fact, Iranian pension funds are the major investors in different economic entities, including steel companies, petrochemicals, pharmaceuticals, transportation and tourism.            About 16.5 percent of the country’s production of cement, 33 percent of steel, 21 percent of iron ore, 10 percent of petrochemicals, 40 percent of pharmaceuticals and 17 percent of autos come from companies owned by the ministry’s four pension funds. These four funds account for 85 percent of Iran’s pension coverage,” Mirzaei said.

    The Iranian Social Security Organization recorded a decent profit last year, but many businesses run by other pension funds are anything but profitable.

    In additional to owing a large fortune to the pension funds, the government is also heavily in debt to the banks, which have also been required to make loans to the government to cover annual deficits.

    There have been many contradictory figures on the scale of the government debt to the banking sector, but according to Mohammad-Baqer Nobakht, who heads the Planning and Budget Organization, the amount stood at 380 trillion rials ($10 billion) four years ago while it has now reached 420 trillion rials ($11.1 billion), a rise of 11 percent under President Rohani.

    Higher figures that have appeared in print are not the real numbers, Nobakht said, stressing that the government will abide by and act on figures approved by the Audit Organization of Iran.

    Yet another source of funds for the government has been contractors who have not yet been paid for work they did for the government.  “Up to 150 trillion rials ($3.9 billion) will be allocated in the form of bonds to repay government debts to private contractors,” Nobakht told a finance conference last week.

    He said small- and medium-sized enterprises have so far received 148 trillion rials ($3.9 billion) of the 160 trillion rials ($ 4.2 billion) they are owed.  In other words, 93 percent of what they were owed has been paid back.

    According to the official, when the Rohani Administration took office nearly four years ago, 2,047 major construction projects, along with subsidiary projects, were incomplete.

    “A portion of these projects are being finalized,” he said, without saying what proportion.  He said the government would like to outsource many of these projects, as it has already done with 2,532 other projects.

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