Iran, holder of the world’s second- biggest oil and gas reserves, will add to its oil stabilization fund if crude prices remain over $65 in the coming 12 months, the deputy central bank governor said.

“As long as the price of petroleum is over $65 per barrel Iran will gain extra petroleum revenue, which will find its way into the oil stabilization fund,” Hossein Ghazavi said in a phone interview from Tehran late yesterday. He declined to comment on the current balance of the fund, which is aimed at providing protection for the economy should oil prices slide.

President Mahmoud Ahmadinejad, whose second term started in August, has been criticized by members of parliament for making frequent withdrawals from the fund, resulting in faster inflation in his first years in office. The inflation was 11.5 percent last month. The International Monetary Fund forecast in a report last month that it will drop to 10 percent this year.

The oil fund “is essential, as it is a rainy-day fund but it is also a very politicized one, as the president has used the money for his own political purposes,” said Mohammed Shakeel, an economist who covers Iran for the Economist Intelligence Unit in London.

Ahmadinejad was first elected in 2005 following promises to distribute the country’s oil riches among the poorest Iranians.

Oil accounts for more than 80 percent of the government’s revenue, Shakheel said. Rising prices have helped the central bank increase its foreign currency reserves. Iran’s reserves have surpassed $100 billion, Ghazavi said in an Oct. 13 interview, declining to provide a more specific figure.

‘Urgently Needed’

Iran’s plan to eliminate subsidies on energy and food over the next five years is “urgently needed” to make the economy more efficient, Ghazavi said.

Iran subsidizes gasoline sold at filling stations under a monthly quota system, as well as electricity, flour and other foods. The government plans to redirect the spending toward the lowest-income groups.

The cash subsidy plans, and Iran’s reliance on oil revenue to fund the coming year’s budget, risk pushing the country into stagflation, a combination of slow growth and high inflation rates, lawmaker Ahmad Tavakoli, who heads parliament’s research center, told legislators on March 8.

The Persian Gulf nation’s economy may grow 2.2 percent in 2010, up from 1.5 percent last year, according to the IMF report. The country’s economy has performed strongly in recent years, supported by high oil prices and expansionary fiscal and monetary policies, it said.