Appendix 3: The Oil Stabilization Fund
- International Monetary Fund
- Published Date:
- March 2007
The Oil Stabilization Fund (OSF) was established in December 2000 with the objective of insulating the budget from fluctuations in oil prices. The fund was established as a foreign currency account at the central bank and is managed by an executive committee composed of the minister of economy and finance, the head of the Management and Planning Organization, the governor of the central bank, and two members of parliament.
The Third Five-Year Development Plan established a U.S. dollar ceiling on the oil export revenue that can be transferred to the budget, based on an oil price of about $16 per barrel. Additional transfers must be approved by parliament. Oil revenues in excess of the budgeted amount are transferred to the OSF. If the realized crude oil export revenue is less than the annual budget allocation by the end of the eleventh month of the fiscal year, the central bank draws from the OSF the amount required to make up the shortfall and transfers its equivalent in rials to the treasury.
All OSF foreign assets are held in a foreign-currency deposit account at the central bank; no more than 50 percent may be lent out domestically in foreign currency through the domestic banking system to the private sector at rates of return close to the London interbank offered rate (LIBOR). A firm may borrow from the OSF over an eight-year period and is required to reimburse its loan from the fifth to the eighth year of the project. The required collateral for the loan may be land, machinery, equipment, and/or corporate bonds.