IMF recommends Azerbaijan to reconsider scope of monetary policy
Azerbaijan, Baku, May 2 / Trend A. Akhundov /
The International Monetary Fund (IMF) recommends Azerbaijan reconsiders the scope of monetary policy, deputy director of the IMF Middle East and Central Asia Department Nadeem Ilahi said at a press conference in Baku today.
"Monetary policy may be toughened in case of pressure in terms of demand," he said. "However, the existing tools are limited and require strengthening. The mission recommends redoubling efforts to develop a new framework for monetary policy to mitigate the volatility of inflation. It also urges official bodies to take active efforts to intensify the markets of debt obligations and capital and to improve the policy of disseminating the information."
He said that the IMF mission held discussions with the Central Bank.
"Some work must be conducted to reduce inflation, to enhance these tools to reduce the impact of state expenditure as well as external factors such as food prices on the world markets and so on. In this area we are working with the Central Bank."
He added that it is important for Azerbaijan to pass from monetary policy, based on the binding of the national currency to the dollar, to the monetary policy based on an interest rate corridor.
"For example, Russia has also experienced such a transition," he said. "We have discussed this experience with the Azerbaijani Central Bank. Russia's experience may be used in Azerbaijan. A monetary policy framework based on the interest rate corridor can allow regulating inflation more actively."
He said that the IMF will continue rendering technical assistance in this area.
The fund has begun lending since 1995. Until now, the IMF has allocated loans to Azerbaijan within six programmes. Azerbaijan will continue repaying the loans previously borrowed from the fund until 2013.
For seven years the Azerbaijani government has been cooperating with the IMF at the level of consultations within Article IV, so the prospects for cooperation on a programme basis are virtually not touched upon during the visits.
The IMF Permanent Mission began functioning in Azerbaijan in 1993, but cooperation with the government begun in 1992. However, in 2009 the IMF decided to withdraw the head of the fund's Azerbaijani office and reduce its staff in the country. Today, the IMF Baku office is managed by the regional office for Central Asia and Caucasus.