Washington, Reuters—Iran has not paid back any of its loans to the World Bank for more than six months, the bank said on Thursday, a further sign of the strains on the sanctions-hit Iranian economy.
Faced with a combination of poor fiscal management and Western economic sanctions for its disputed nuclear program, Iran has suffered from spiralling prices and high unemployment in the last year.
The World Bank said it was placing Iran’s loans in non-performing status, as it must do when a country has not made any payments for more than half a year. Iran owed the bank USD 697 million (GBP 457.5 million pounds) on June 30, of which USD 79 million was overdue.
The designation from the World Bank, often a lender of last resort to cash-strapped governments, means Iran may find it even harder to get money from commercial creditors.
Iran will also be ineligible for any new World Bank funds, although the country has not borrowed from the bank since 2005 and has no current World Bank programs. It is still required to make payments on what it owes the bank.
The World Bank said it took a hit of USD 81 million in the fiscal year that ended on June 30 due to Iran’s non-performing loans, a tiny percentage of its multibillion-dollar lending portfolio.
Zimbabwe is the only other country beside Iran that is in “non-accrual status” – it has not made any payments to the World Bank since 2000.
The United States and its allies have imposed hard-hitting sanctions against Iran’s oil and banking sectors to choke off funding to its nuclear program. Western governments say Iran seeks to develop the ability to make weapons, while Iran insists its nuclear program is for peaceful purposes.
The sanctions nearly halved Iran’s oil revenues in 2012 to around USD 50 billion-60 billion. Iranian banks were disconnected from the global financial network, making payment transfers to or from Iran extremely difficult.
The World Bank said it is fully in compliance with international and U.N. sanctions against Iran.