Robert Pether and Khalid Radwan were working for an engineering company contracted to oversee the construction of the bank's new Baghdad headquarters, according to a United Nations report, when they were arrested in April 2021.

A report from a working group for the UN Human Rights Council said the arrests stemmed from a contractual dispute over "alleged failure to execute certain payments".

Both men were sentenced to five years in prison and fined $12 million, the working group said.

A security official, speaking on condition of anonymity, told AFP that Pether, in his fifties, was released "due to his poor health".

Australian media have previously reported that the family suspected Pether had developed lung cancer in prison and that he had undergone surgery for skin cancer.

A second Iraqi official confirmed the release of Radwan, adding that he was not allowed to leave the country until a "final decision" was made regarding his case.

Australia's ABC broadcaster quoted the country's foreign minister, Penny Wong, as welcoming the release and saying the Australian government had raised the issue with Iraqi authorities more than 200 times.

Simon Harris, foreign minister for Ireland, where Pether's family lives, posted on X: "This evening, I have been informed of the release on bail of Robert Pether, whose imprisonment in Iraq has been a case of great concern.

"This is very welcome news in what has been a long and distressing saga for Robert's wife, three children and his wider family and friends."

Speaking to Irish national broadcaster RTE, Pether's wife, Desree Pether, said her husband was "not well at all" and "really needs to just come home so he can get the proper medical care he needs".

"He's completely unrecognisable. It's a shock to the system to see how far he has declined," she said.