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IMF says Central Bank’s reserves to increase

24 September 2019 19:43 (UTC+04:00)
IMF says Central Bank’s reserves to increase

By Abdul Kerimkhanov

The International Monetary Fund (IMF) predicts an increase in the foreign currency reserves of the Central Bank of Azerbaijan (CBA) for the period of 2019-2024.

According to IMF forecasts, CBA's foreign exchange reserves will amount to $7.01 billion at the end of 2019.

In April 2019, the IMF predicted a $6 billion-increase in the CBA’s reserves.

According to updated forecasts of the fund, the Bank’s reserves will increase to $7.31 billion in 2020. (April forecast was $6.3 billion).

As for the coming years, the IMF predicts an increase in CBA reserves in 2021 to $7.61 billion, in 2022 - to $7.91 billion, in 2023 - to $8.21 billion, in 2024 - to $8.51 billion.

Thus, in 2019-2024 the growth of CBA reserves will amount to 21.4 percent, according to IMF estimates.

IMF states that the Central Bank’s reserves at the end of 2019 will be enough to cover the costs of non-oil imports for 5.9 months, in 2020 - 6.3 months, in 2021 - 6.8 months, in 2022 - 7.4 months, in 2023 - 7.8 months, in 2024 - 8.3 months.

As of August 30, 2019, the Central Bank's foreign exchange reserves amount to about $6.01 billion.

In general, the IMF expects moderate growth in net foreign assets in Azerbaijan’s banking sector in 2019-2024. The IMF expects growth of foreign banking assets to 4.18 billion manats $2.46 billion at the end of 2019.

Meanwhile, CBA plans to switch to a hybrid inflation targeting regime within 3-5 years, IMF analysts noted.

"At the same time, the CBA will rely on the operational goal at the discount rate and on a stable market indicator of the exchange rate. This step can lay the foundation for full inflation targeting in the future," the IMF reported.

At the same time, IMF experts pointed out that the currently established exchange rate limits the development of the interbank market and risks fueling macro-financial vulnerability.

The IMF further informed that the small market, difficulties in managing liquidity, the vulnerability of banks, and dollarization create difficulties for the CBA while it affects interest rates and inflation.

“We recommend improving the policy framework, including by strengthening the Central Bank’s independence, as well as accelerating the transition to a floating exchange rate regime,” the IMF concluded.

Note that Azerbaijan joined the International Monetary Fund on September 18, 1992

The IMF's primary purpose is to ensure the stability of the international monetary system - the system of exchange rates and international payments that enables countries and their citizens to transact with each other.

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Abdul Kerimkhanov is AzerNews’ staff journalist, follow him on Twitter: @AbdulKerim94

Follow us on Twitter @AzerNewsAz

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