In Rare Delinquency, Iran’s World Bank Loans Overdue As Sanctions Bite

WSJ

The World Bank said late Thursday Iran is more than six months overdue on loan repayments, making it only the second nation delinquent on development finance owed to the Washington-based institution.

The default could deal another blow to Iran’s economy–already squeezed by international sanctions–by potentially raising another major barrier to financing and pushing up borrowing costs for the country.

The World Bank’s International Bank for Reconstruction and Development said Iran is more than six months overdue on $81 million in loans, including penalties. Iran’s total outstanding debt to the bank is $697 million for old development loans. The bank issued low-interest loans in the early 1990s for irrigation, flood control, electricity and education projects. In compliance with international sanctions, the bank hasn’t approved any new loans to the country since 2005.

There is only one other country currently on the bank’s non-performing loan list: Zimbabwe, a country that has also faced heavy international censure.

It’s unclear whether Tehran doesn’t have the cash to pay its bills or if the delinquency is a political thumbing of Iran’s nose to the U.S.-led bank. The U.S. is the largest shareholder of the World Bank, its biggest contributor, and appoints its president.

The U.S. has steadily ratcheted up international pressure on Tehran in an effort to persuade the government to halt its alleged nuclear weapons program. Sanctions have weighed heavily on the Iranian economy, forcing the currency at times into a near free-fall and fueling a political shakeup.

At the World Bank’s annual meetings last October, Iran’s representative to the bank Seyyed Shams Al-Din Hosseini said the institution “has denied the rights of the Iranian people,” a reference to the bank’s refusal to finance Iran, and decried what he called the “monopoly of [World] Bank management by the U.S.”

“Imposing threats and pressure by way of financial and monetary instruments, as well as unfair financial and monetary sanctions are shining examples of political and outrageous confrontation in the economic sector,” he said.