Will Iran Be Granted New Loans?

One year after putting Iran on the “deadbeat” list, Head of Iranian Foreign Investment Company (IFIC) talks about a turnaround in relations with the Bank after nine years. The last time Iran was granted a loan was May 26th in 2005 during Mohammad Khatami’s tenure. After that during the eight years of Ahmadinejad’s presidency Iran did not have any World Bank programs. International sanctions made it impossible for Iran to make any payments on its loans and the relations with the global lender deteriorated.

Last summer and in last days of the previous administration, the World Bank issued an announcement saying that Iran is more than six months overdue on loan repayments. The World Bank’s International Bank for Reconstruction and Development said Iran is more than six months overdue on $79 million in loans, with $159 million oil revenues per day it was not difficult for Iran to pay off its debts. According to World Bank officials sanctions and delay in passing the budget bill in Iran’s Parliament were the main reasons. According to a World Bank official, payments were delayed for four months due to sanctions and then the Iranian 1392 (2013) budget posed a problem. This placed Iran’s loans in the non-performing status while there is only one other country currently on the bank’s non-performing loan list: Zimbabwe.

At that time critics in Iran believed that the 10th administration was indifferent to Iran’s credit and reputation in international community. They believed that such behaviors and approach had consequences for Iran. One of them was Arsalan Fathipour, the head of Parliament’s Economy Commission ,” Six-month overdue on loan repayments will tarnish I.R of Iran’s reputation and the Parliament should step in to tackle this issue” he said. Nothing was officially announced by the Parliament though. At that time Behrouz Alishiri Head of Iranian Foreign Investment Company called the statement released by World Bank “non-technical and totally wrong”.  He blamed the unilateral western   sanctions and bank transfer problems for the delay of debt payments. “Iran is among founders and shareholders of the World Bank and has been granted various loans. Iran has paid its installments in due time. The US and the west should authorize transfer of Iranian payments to the World Bank.”, he said.

With the new government of Hassan Rouhani’s conciliatory tone Iran’s Ministry of Economy and Finance is determined to enhance its relation with the World Bank and other international institutions. Iran’s government has taken measures to pay off its debts. Iran’s Minister of Economy Ali Tayyebnia has called for closer relations with the World Bank. He made the remarks in a meeting with World Bank Deputy Director for the Middle East and North Africa, Christian Anderson in the 2014 World Bank Group-IMF Annual Meetings. He called for World Bank technical and financial support for various Iranian projects. “Expansion of economic relations with international bodies including the World Bank is a priority of Iran’s government”, he said.

Behrouz Alishiri Iran’s Deputy Minister of Economy announced that Iran paid off all its debts to World Bank last month. He also mentioned the fact that transfers were finally authorized by the US Treasury. “Iran has paid off its debts and granting loans are to be resumed” he said. Dr. Alishiri added that there are currently negotiations on new programs and two World Bank delegations have already travelled to Iran.

It is not clear whether Iran is getting prepared for the post-sanctions era or there are plans for a World Bank loan even prior to lifting the imposed sanctions. The latter seems not to be attainable due to World Bank’s stance on international sanctions against Iran. Dr. Alishiri said that the sanctions have been obstacles in the way of repayments. He also talked about Iran’s efforts to balance out political considerations in relations of the World Bank with its members. According to him those efforts resulted in a statement by G-24 (developing countries and emerging economies in Asia, Africa and Latin America) asking the World Bank to rule out political considerations.

There are no more obstacles in the way of enhancing relations with the World Bank and establishing new programs in Iran.  According to Head of IFIC “air pollution prevention”, “road safety”, “cancer outbreak” and “conserving Lake Urumia” have been discussed. It seems that Lake Urumia program stands a much better chance. World Bank experts have been invited to visit the lake and Iran hopes to obtain a result in the coming month.

It might take one, two or three months. What matters the most is Iran’s determination to expand its relations with international financial institutions not just to be funded but to deliver positive signals to investors all over the world and encourage them to return to Iran, in order to achieve that, resolving the nuclear issue and lifting the imposed sanctions are of crucial importance.

Initially published in Tejarat-e-Farda weekly magazine