Iran on the Brink: Banking Collapse, Sanctions and Drought Push Economy to the Edge

Tehran has launched one of its most significant financial interventions in decades as multiple crises converge — but the relief may be short-lived.

Iran’s central bank has taken over the privately-owned Ayandeh Bank, which had spiralled into crisis after years of mounting bad debts and alleged mismanagement. The move was aimed at preventing a full-scale banking collapse. Authorities have sought to reassure the bank’s 7.6 million depositors that their funds remain safe, as Ayandeh is folded into state-owned Bank Melli Iran (BMI).
Founded in 2012 by the influential Ansari family, Ayandeh built its growth on offering the highest interest rates in the market, attracting huge deposits that it could only sustain via large borrowings from the central bank — thereby helping fuel inflation. Now facing an estimated debt to the central bank of some 5 000 trillion rials (~US$4.6 billion) and with more than 97 percent of its loans reportedly non-performing, the bank became a systemic risk.
BMI has assumed Ayandeh’s assets and liabilities, pledged to keep staff and maintain existing deposit terms until contract maturities. But analysts warn that the deeper balance sheet problems — both at Ayandeh and across the sector — remain unresolved.

Triple-Threat: Sanctions, Currency Crash and Structural Weakness

Re-imposed UN sanctions, a plunging currency and growing inflation compound the banking peril. The rial recently traded near 1.1 million per US dollar, while inflation is estimated at 40-50 percent. The World Bank now expects Iran’s economy to contract by 1.7 percent in 2025 and 2.8 percent in 2026, as its oil-reliant model comes under growing strain.

Despite oil accounting for roughly 25 percent of GDP, new restrictions on banking and transportation channels threaten that lifeline. If China — Iran’s biggest oil buyer — scales back purchases, the export collapse could trigger a fresh currency spiral and disrupt public sector wage payments and essential imports.

Nationwide Drought Deepens the Crisis

Beyond finance, Iran is battling an escalating environmental emergency. Official data show that water inflows to dams fell 39 percent year-on-year to 780 million cubic metres by mid-October. National reservoir levels dropped to just 17.7 billion m³, down from 23.3 billion m³ a year earlier, leaving many dams at less than 15 percent capacity. In Tehran province alone, key dams like Amir Kabir and Lar are at 11 percent and 2 percent respectively.
In 21 of Iran’s provinces no measurable rainfall has been recorded since September — a stark contrast to the long-term autumn average of 56 mm. Experts warn that unless urgent irrigation reforms and water-management measures are implemented, both rural livelihoods and urban water supplies will face serious jeopardy.

Public Anger Growing as Living Standards Collapse

The hardships are widespread. Many ordinary Iranians now struggle to pay rent, school fees or purchase basic food items. With financial panic mounting and state options limited, internal reports warn that fresh protests are inevitable.
Activists and analysts alike view the confluence of banking, currency, sanction and drought shocks as a potential multi-layered system failure — rather than a simple economic downturn.

What Comes Next?

While the Ayandeh takeover may buy time, the broader challenge remains: the Iranian economy is confronted by intertwined crises that no single policy can resolve. Without structural reforms, fresh capital injections and an easing of sanctions, the country edges closer to a full-scale economic collapse.

Keywords: Iran economy, Ayandeh Bank takeover, rial crisis, inflation Iran, UN sanctions on Iran, Iranian drought, water crisis Iran, oil exports Iran, Bank Melli Iran

Meta Description: Iran’s economy teeters on the edge as a major private bank is nationalised, the currency collapses, and drought shuts down water supplies. The confluence of banking collapse, sanctions and ecological crisis signals a systemic meltdown.

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