Azerbaijan, Baku, 11 April / Trend corr I. Khalilova/ The insurance fund on foreign loans under the state guarantee is being established through the state budget. In accordance with the regulations which were approved by the Azerbaijani Cabinet on 10 April, the system of management, registration and utilization of the Fund's reserves was defined.
The Azerbaijani Finance Ministry said on 11 April that the public budget allotted AZN 50mln to establish this Fund. A manat account and accounts in other currencies will be opened to offer credit under the state guarantee for timely implementation of Azerbaijan's fiscal obligations.
The average annual volume of reserves in the Fund should not be less than 25% of the expected in that period's aggregated volume of fiscal obligations on the credits and liabilities insured under the state guarantee.
Through the saved reserves, the Fund may pay out the foreign liabilities on the loans should the main borrower fail to pay it, a default threat. In this case, the borrower should appeal to the Finance Ministry within 30 days until payment and state the reason for the non-fulfillment of liabilities. The Finance Ministry, in its turn, in agreement with the Cabinet, may direct the funds to pay the debt.
The funds may be transformed to the high rating banks management in order to save them from depreciation. The funds are placed in the corresponding currency accounts depending on the currency structures of Debt Instruments and taking into consideration the liquidity and risks.
Reserve record of the Fund is carried out by the Finance Ministry's corresponding structure.
In 2008, the funds to provide international credits in Azerbaijan were put on different accounts in the State Budget and charged off at the end of the year. The establishment of the Fund will provide useful utilization of the funds. The new development was introduced after the adoption of the new Bill on State debt in 2007. Under the Bill, the record and management of foreign borrowings under the state guarantee is implemented by the Finance Ministry.
As for 1 January 2008, the foreign borrowings in Azerbaijan reached $2,441,9mln that makes up 8.2% GDP. The volume of foreign borrowings increased by 23.8% compared to early 2007.
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