Azerbaijan, Baku, March 10 / Trend I.Khalilova /
Azerbaijan's economy is well protected from the impact of global world crisis, and the country's authorities successfully responded to the crisis, head of the IMF mission to Azerbaijan Nienke Oomes said at the final meeting with the chairman of the Central Bank of Azerbaijan (CBA) Elman Rustamov.
She also appraised the anti-crisis activities of the Central Bank.
"Preservation of the stable exchange rate and ensure of the liquidity of the banking sector has allowed the Central Bank to ensure the country's financial stability," she added.
According to her, stable rate has created conditions to reduce inflation, curb the temporary growth of dollarization and prevent negative influences on the balance sheets of banks and businesses.
"Ensuring the stability of national currency in terms of increased risk of upsetting macroeconomic stability in the first quarter of 2009 became the leading element of the CBA's anti-crisis policy," Rustamov said.
According to him, the CBA showed "calmness" in terms of psychological pressure in connection with currency devaluations in neighboring countries and the impact of global crisis, while maintaining manat stable. "Although it required some resources, but the bank continued to increase the strategic currency reserves of the country in 2009," he added.
A fundamental factor in maintaining stable exchange rate of manat, in his opinion, was a positive balance of payments. Because of a surplus balance of payments and taking into account the time of tension in the foreign exchange market, the Central Bank considered it expedient to prevent the devaluation of the manat.
"Ensuring the stability of the manat rate at the expense of the accumulated foreign exchange reserves, has allowed to eliminate psychological tensions in the foreign exchange market of the country since the second quarter," Rustamov said.
Exchange rate policy persuaded in the significant proportion of imports on the domestic consumer market, has played an important role in reducing the 2009 average annual inflation rate to 1.5 percent. Along with this, the bank avoid deflation, which is not considered to be positive for economic growth.
"Low inflation and acceptability of multilateral course allowed to protect the country's competitiveness, reduce the cost of the real exchange rate of manat on non-oil sector at 3.5 percent during a year," the head of the Central Bank said.
One of the Central Bank's objectives was covering the needs of the economy in money by limiting foreign financial sources. The Central Bank used a radical softening of monetary policy, by giving the economy direct liquidity rate of 5 percent of GDP in accordance with the new legislative base.
"Central Bank's injections prevented decrease in money supply, ensured the financial stability of banks and economic activity, and provided the necessary support to cover foreign debt and supply-investment systemically-significant large enterprises," Rustamov said.
According to him, the optimal anti-crisis measures of the bank also restricted channels of influence of the global crisis on the banking system, providing even more readiness to enter the sector in the new conditions.
"A package of measures in the direction of risk management, capitalization and financial reserve of banks, management of foreign debts were implemented in the pre-crisis period, the banks have been supported in providing liquidity, maintaining asset quality in the crisis period," Rustamov said.
As a result, as opposed to many countries, the banking system of Azerbaijan did not meet the facts of bankruptcy or particular tension. The sector has maintained its volume and stability. During 2009 the main indicators for the development of the sector were positive, namely, bank's assets increased by 14 percent, the loan portfolio - 17 percent, deposits - 29 percent, the volume of total capital - by 18 percent, he said. In particular, the banks have expanded sales network and improved the quality of service, as well as increased capacity of the sector to financial services as a result of using modern tools of sale.
In these circumstances, much attention was paid to development of the institutional potential of banks, namely the introduction of the principles of corporate governance, in particular, the wide application of risk management mechanisms.
"Thus, the country coped with the crisis by its own resources, and, despite the global financial crisis and recession a balance of Azerbaijan's economy was maintained. The economy has continued dynamics of stability and development", Rustamov said.
While discussing the purposes of prospective policy, the IMF mission supported the intention of the Central Bank in maintaining a stable rate. However, experts of the Monetary Fund stressed the need to increase the flexibility of the exchange rate regime by increasing the pace of economic diversification and integration into international capital markets. The mission expressed its readiness to continue dialogue to determine appropriate terms and ways to increase the flexibility of the course.
The IMF mission appreciated the Central Bank's plans to consolidate the banking system. The Central Bank aims at strengthening the capitalization of the banking system, maintaining the stability and recovery, and also providing greater quality and reliability of banking services.