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Minus 13 percent in support of Azerbaijani banks

Business Materials 23 May 2009 11:18 (UTC +04:00)
Minus 13 percent in support of Azerbaijani banks

Azerbaijan, Baku, May 22 / Trend /  

Leyla Abdullayeva, expert of Trend 's analytic department  

Central Bank of Azerbaijan's reducing the interest rate by 1 percent more will support further macroeconomic balance, financial stability and maintain the economic activity. Cheap loans to companies and individuals will help revitalize the economic environment.

According to the decision by the Board of the CBA, from May 25 the interest rate will be reduced 1 percent to 2 percent. Last year, the rate in three stages was reduced from 15 to 8 percent, and since the beginning of this year, in two phases - from 8 to 3 percent.

The next reduction in the interest rate will help alleviate the situation on the deposit market of Azerbaijan as well. Today, due to the global financial crisis, when "panic" came to the population of Azerbaijan like other countries and investors become attentive with their funds, the CBA try to return back citizens' trust in the banks, providing banks' access to additional resources.

Unlike other countries, Azerbaijan did not face large-scale outflows of people's capital from the banking sector, but, nevertheless, the reduction of deposits is felt compared to 2008. For example, in March Azerbaijani banks' deposit base decreased 15.5 percent, January-March - 28.9 percent and annually - 14.3 percent.

The base rate of CBA even at 2 percent continues to be one of the highest amongst large central banks worldwide. For comparison: currently the key rate of the U.S. Federal Reserve System (FRS) is at the level of zero to 0.25 percent, Bank of Japan - 0.1 percent, while the base rate of British Central Bank made up 1.5 percent after the recent reduction.

But the decline in the interest rate in Azerbaijan is not forced, and should not be reduced to level of European countries and the United States, since the Central Bank of Azerbaijan timely protected the banking sector from the global financial crisis.

External borrowing of Azerbaijan's banking sector made up nearly 18 percent of the total borrowed funds, and reach $2 billion compared with other countries, where external debt is nearly 90-100 percent, the minimum figure enables to secure Azerbaijani banks from the influence of the global financial crisis.

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