Azernews.Az

By Aynur Jafarova

The International Monetary Fund (IMF) supports the measures aimed at limiting the consumer lending in Azerbaijan.

The news was announced by Head of the IMF mission to Azerbaijan Raja Almarzoqi on March 17 at a press conference dedicated to Article IV of the IMF establishment agreement.

"We appreciate the aspiration of the Central Bank of Azerbaijan (CBA) to preserve the neutrality of the monetary policy, as well as its initiatives to limit the growth of consumer lending as correct. At the same time, the consequences of such measures should be controlled. Recent actions taken by the Central Bank to strengthen the financial control rules will support financial stability. But there is a need for additional measures to improve the endurance of the system," he said.

Almarzoqi also noted that the rapid growth of consumer lending mainly creates risks for borrowers.

"In this regard, a decrease in the share of consumer loans would be beneficial amid the increase in the share of lending to the private sector and SME," he said. "There are very high interest rates in the consumer lending segment and, as a consequence, the margin of banks. Of course, the limitation of this segment does not mean that the banks will immediately start lending to businesses. But if one limits the profitability, the banking sector will begin to look for other opportunities to gain profit."

The final report of the Mission following the consultations on Article IV, which is held annually on a regular basis, will be published in late May.

Almarzoqi went on to say that Azerbaijan's successful debut placement of sovereign Eurobond in the background of the market environment in the region shows the investors' confidence in the fact that the management of oil revenues is performed in a balanced way.

"The main challenge facing the country is to reduce dependence on oil revenues and give an impetus to the development of private sector as the driving force of the diversified economic growth," he stressed.

He also noted that the country's short-term economic prospects are favorable.

"The non-oil sector is expected to grow to eight percent of the GDP and the inflation is expected to remain at one-digit level in 2014-2015. The main risk is a possible reduction in oil prices," he noted.

Almarzoqi also said the IMF supports the tougher fiscal policy envisaged in the state budget for the current year.

"The goal is to consolidate the budget and reduce dependence on oil revenues by means of further decline in transfers from the State Oil Fund of Azerbaijan (SOFAZ). The revenues of the state budget generated by the private sector should grow. It will facilitate the creation of a strong buffer for the national economy in case oil prices fall," he said.

Almarzoqi also highlighted the need to cut public spending.

"This can be achieved by increasing the efficiency of state investment, and determining the priority of various large-scale investment projects. If the business climate continues to develop in this background, then the economic growth of Azerbaijan will grow healthier," he added.

The visit of the IMF mission to Baku started on March 4, and continued until March 17. The visit was aimed at holding consultations with the Azerbaijani government on Article IV of the IMF establishment agreement.

Azerbaijan has cooperated with the IMF since September 18, 1992. IMF loans were allocated to Azerbaijan within six programs, but cooperation with the IMF has been at the level of consultation since 2005, as the Azerbaijani government has refused to receive loans from the fund.

The IMF office opened in Baku in 1992. Although its staff has been reduced since 2009, it has remained an important partner for the Azerbaijani government. It is noteworthy that cooperation between Azerbaijan and the IMF played an important role during the global economic and financial crisis.