The European Commission cancelled a grant worth more than 31 million dollars to Fiji in a sign Monday of growing international impatience at the military regime's refusal to hold elections.
In a statement, the executive arm of the European Union said the 2009 grant to help Fiji's struggling sugar sector was being cancelled "in the absence of any indications that a legitimate government will be in place in 2009."
The annual disbursements have been suspended since military leader Voreqe Bainimarama took power in a bloodless coup in 2006, and has resisted pressure to restore democracy.
"I encourage the government of Fiji to fulfil its commitments to the EU so that we are able to reinstate sugar reform payments in the future," said Louis Michel, the European commissioner for development and humanitarian aid.
Last month, the military regime tightened its grip on power leading to its suspension from the Pacific Islands Forum, a regional bloc that represents the common interests of regional island nations.
The United States and Fiji's most affluent near neighbours, Australia and New Zealand, have also imposed targeted sanctions.
Fiji's constitution has been scrapped and its judiciary sacked, while Bainimarama has given himself another five years in power by declaring there would be no elections before 2014.
The European Commission has warned that the actions of the military regime are unacceptable and that assistance grants would not resume without a return to democracy.
Bainimarama toppled the elected government of Laisenia Qarase in December 2006, accusing it of corruption and unfairly favouring the indigenous Fijian majority over the minority ethnic Indian population.
He sees Fiji as beset by divisions between the Fijians and Indians and has vowed to reform the electoral system before holding elections.