Azernews.Az

By Aynur Jafarova

Azerbaijan will reduce discount rate by 0.5 percent from May 1, 2014.

Under the decision made by the management board of the Central Bank of Azerbaijan (CBA), discount rate will reach 4.25 percent.

"Given the low inflation level, the decision was made with the aim of providing the necessary support for the national economy's diversification, increasing investment activities in the non-oil sector, and creating the conditions to continue the drop in interest rates," CBA said.

The parameters of the interest rate corridor have also changed; the corridor's maximum level was reduced from 7 percent to 6 percent, and the minimum level from 1 percent to 0.5 percent.

In its last meeting, the CBA management board pointed out that the national economy's growth had continued in the first quarter, and that the main source of this growth was the non-oil sector.

"The country's favorable external position has been maintained, and the strategic currency reserves continued to grow. Macroeconomic stability has strengthened and there has been a drop in inflation, its average level reaching only 2 percent in the first three months. The stability of manat's exchange rate continues to play an important role in maintaining macroeconomic stability," CBA noted.

The total amount of the CBA's currency reserves exceeded $14.7 billion in the first quarter of 2014. The figure was $12.33 billion in the first quarter of 2013.

The CBA's currency reserves increased by 21 percent and reached $14.152 billion in 2013.

The CBA plans to increase the volume of its reserves to $16 billion by late 2014.

The rapid growth of currency reserves was the main factor for the formation of a strong macroeconomic buffer and reduction of the sensitivity of Azerbaijan's domestic economy towards external shocks.

The increase in reserves led to the maintenance of the continued net investment position of Azerbaijan at an acceptable level.