Azerbaijan, Baku, May 13 /Trend, N.Ismaylova/
The Executive Board of the International Monetary Fund (IMF) approved prudent policy responses to the impact of the global crisis, which helped maintain macroeconomic and financial stability and robust GDP growth, IMF report on the review of Azerbaijan's conformity with Article VI consultation with the Republic of Azerbaijan said.
"The most important task ahead is to maintain hardly-gained stability and diversification of sources of economic growth," said the head of the IMF mission to Azerbaijan Nienke Oomes during the video conference on May 13.
Directors commended the authorities' adjustment measures in the face of falling fiscal revenues in 2009 and their renewed commitment to fiscal sustainability. They supported the intention not to increase spending in 2010 even if oil prices turn out to be higher than budgeted, given the room to improve expenditure efficiency and the need to significantly reduce the non-oil deficit to secure medium-term fiscal sustainability. Directors commended the authorities on making Azerbaijan the first country to be fully compliant with the principles and criteria of the Extractive Industries Transparency Initiative. They looked forward to greater transparency on the expenditure side and reforms to lower the current expenditure burden and the financial support to state-owned enterprises, cut tax exemptions, and simplify the tax system.
Directors agreed that the authorities' decision to maintain a stable exchange rate had served the country well during the crisis, by reducing inflation, preventing further dollarization, and avoiding a negative impact on households' and banks' balance sheets. They saw continued benefits from maintaining exchange rate stability, noting that the real exchange rate remained close to equilibrium in 2009. Directors broadly concurred that the benefits from more flexibility could be expected to increase in the medium term, as the economy becomes more diversified and more integrated with international capital markets. They saw merit in close cooperation between the staff and the authorities in this area.
Directors welcomed the authorities' commitment to developing a non-oil export strategy that focuses on enhancing competitiveness and improving the business environment through further progress with tax, customs, and financial sector reforms. They welcomed the authorities' continued commitment to join the World Trade Organization.