Iran’s external debt increased slightly to $9.14 billion by the end of the previous fiscal year on March 20, the Central Bank of Iran reported.
The country’s foreign debt is 1.2% or $111 million higher compared with the figures reported for fiscal 2019-20.
Medium and long-term debt stood at $7.17 billion, accounting for more than 78% of the total. Short-term debt was $1.96 billion on March 2021, rising from $1.53 billion the corresponding month a year before.
Short-term debt includes all debt having an original maturity of one year or less and interest in arrears on long-term debt.
Increase in external debt could be partly explained by Tehran’s efforts to raise funds for fighting the Covid-19 pandemic in the first months of the plague.
Iran received $50 million from the World Bank to help the health sector cope with the fatal disease, a deputy health minister said earlier.
In the meantime, the OPEC Fund for International Development also approved a $500,000 in emergency grant to Iran to buy equipment needed to fight the plague.
Iran has solicited multilateral development banks for funds, in which the country is a member, namely the Islamic Development Bank and Asian Infrastructure Development Bank.
CBI’s request for a $5-billion emergency loan from the International Monetary Fund was turned down by the crisis lender under US pressure.
Reimbursements Planned
The government is supposed to repay $600 million in foreign debt in the current fiscal year. The amount is projected in the proposed March 2020-21 budget, according to a press release of the Plan and Budget Organization.
Of the total, $166m will be paid to the Islamic Development Bank for loans disbursed in 2012. Commitments of the Energy Ministry and its subsidiaries worth $244m are on the repayment list. The loans were taken for economic development projects.
Reimbursements also include $64 million owed to the OPEC Fund for International Development. Iran also has to reimburse part of its debt ($56m) to the World Bank. The balance is related to other development projects.
Compared with most developed countries, Iran’s financial commitments are insignificant and among the lowest in the world. Analysts say low foreign debt is not benign for economic prosperity because it also reflects the strength of a nation’s economic ties with foreign banks and international monetary institutions. Likewise, low external debt may also indicate a country’s inability to borrow from the international market.
As such, long-term loans to a country indicate the lenders’ confidence in the financial power and ability of the borrower. This may partly explain why less developed and poor countries have less foreign debt. Banks are normally unwilling to take risks by lending to dysfunctional economies.
Attracting foreign investment in Iran has become much harder after the US pulled out from the nuclear deal in November 2018 and announced new sanctions on key economic, industrial and banking sectors.
