Azernews.Az

The financial crisis that hit worldwide markets is now affecting Azerbaijan, a local research center has concluded.
According to the Information and Resource Center on Oil Industry, the crisis could cause undesirable consequences for the Azerbaijani economy for several reasons.
First, Azerbaijan`s market is heavily reliant on US dollars. Data shows that 46% of loans are borrowed in dollars while 58% of bank deposits are made in dollars. Moreover, transactions in the real estate market are carried out in dollars and about half of the funds kept in the State Oil Fund, the body that maintains oil revenue cash deposits, are kept in dollars. Therefore, the slump in the dollar rate driven by the financial crisis could send shock waves throughout Azerbaijan`s finance sector.
Second, 50% of the Oil Fund`s investment portfolio is held in dollars, which means that it is unclear what will happen to these funds if the US securities market gets bogged down in a crisis.
Finally, the worldwide crisis has brought down prices for crude oil, which could result in major financial losses for Azerbaijan, since 73% of the country`s budget comes from oil revenues, the Center said in its report.
The report also noted that the only step taken by the Azerbaijani government, so far, to alleviate the impact of the global crisis was suspending the allocation of bank loans. However, if the recently enacted ban remains in force for a long time, this will cause the bankruptcy of some local banks.
Nearly all banks discontinued providing loans to citizens beginning in September.
"The international financial crisis will greatly affect Azerbaijan. At least banks, as well as construction firms and companies mainly selling their goods on credit, will face the threat of bankruptcy," the researchers concluded.
Azerbaijani Deputy Minister of Economic Development Niyazi Safarov said the financial crisis could have a certain impact on the country but the government was developing a plan of action to minimize it.