IMF recommends Azerbaijan gradual move toward greater exchange rate flexibility

Baku, Azerbaijan, June 9

By Azad Hasanli - Trend:

The IMF (International Monetary Fund) recommends Azerbaijan a gradual move toward greater exchange rate flexibility in the medium term, the head of IMF mission on Azerbaijan Raja Almarzoqi said, the fund reported June 9.

The Central Bank of Azerbaijan (CBA) earlier was planning to move to a floating exchange rate of manat.

Azerbaijan is not yet ready to fully move to a floating exchange rate of manat, since the country should have enough organizations that earn a lot of money, according to the CEO of CBA Elman Rustamov said.

"Currently, there are only three such organizations in Azerbaijan - the State Oil Fund of Azerbaijan, the Central Bank and the company SOCAR (State Oil Company of Azerbaijan)," he said April 2 during the parliamentary committee on economic policy.

"If we move to a "fully floating rate", regardless of the situation on the market, the rate of manat can both strengthen and cheapen by 20-30 percent. This, in turn, could have a negative impact on the economy of the country," Rustamov said earlier.

"Since the February devaluation, the CBA has tightly managed the exchange rate and mixed forbearance on widened net open positions and on restructuring of loans with proactive measures to support financial stability," Raja Almarzoqi said.

Supervision is hampered by, among other factors, rules limiting the intrusiveness of on-site inspection and by subordinated loans to IBA which place the CBA in the awkward position of being a part-owner in an institution it supervises, according to him.

"Strengthening regulations and stepping up supervision in line with the Financial Sector Assessment Program (FSAP) recommendations will be essential to preserve financial stability," he said.

The IMF office was opened in Baku in 1992. Despite its staff being reduced since 1999, it remains an important partner of the Azerbaijani government. It should be stressed that cooperation with the IMF played an important role in the global economic and financial crisis.

The IMF has provided long-term loans to Azerbaijan in the amount of $577.3 million in 1995-2005 in order to support the program of economic reforms.

Since 2005, Azerbaijan has had no need to access funds of the fund.

Since 2006, the IMF and Azerbaijan have been cooperating within the framework of consultations and technical assistance missions in key areas of macroeconomic policy.

During 2014, four of the IMF missions visited Azerbaijan and presented their recommendations to the state bodies of the country. These recommendations addressed such areas as public debt management, budget classification, as well as the fight against money laundering and terrorist financing, reforms in the pension system as well as Article IV of the Agreement on the IMF.

Edited by CN

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Follow the author on Twitter: @AzadHasanli

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