Azerbaijan’s new policy of attracting foreign loans should not be concern for international financial organisations

Business Materials 10 September 2012 09:21 (UTC +04:00)

Azerbaijan, Baku, Sept. 10 / Trend A.Akhundov /

There is no reason for concern of the international financial organizations working with Azerbaijan because of the country's decision to reduce attraction of foreign loans under state guarantee unless absolutely necessary, a source in the government told Trend on Saturday.

At present, the international organizations are clarifying directions of operations in the country in line with the new approach of the Government of Azerbaijan.

In his speech at the meeting of the Cabinet of Ministers on the outcome of socio-economic development in the first half of 2012 and the challenges ahead, President Ilham Aliyev said that Azerbaijan should be more cautious in raising additional loans.

"The Azerbaijani government has always adhered to a conservative approach to the issue of external debt. Crisis in developed countries has shown that one of the main causes of negative shocks in the economy is the high level of external debt. This does not mean that Azerbaijan will not attract borrowing. If there are opportunities to draw the loan on favorable conditions, Azerbaijan will do it. However, Azerbaijan has always kept the maximum level of borrowing under control, and it will always be under control," the source said.

Azerbaijan has created a good base to neutralize the adverse external shocks that may affect the macroeconomic stability in the country.

"In a number of developed countries this problem has become sharp. Volume of debt and the means necessary for its service, exceed the GDP of these countries. Azerbaijan's foreign debt stands at about seven percent of GDP, strategic currency reserves exceed it by 8-9 times, that is, Azerbaijan can repay this debt at any time," the source said.

The World Bank (WB) fully supports the new approach of the Government of Azerbaijan to the cautious policy of attracting foreign borrowing, and in accordance with this, develops directions for the work in the country for the next two years, the WB Baku Office told Trend earlier.

In this regard, the bank's strategy will be built on several principles: any new projects should reflect the real needs of the country and be based on the priorities of the government, all new projects must be clearly justified, be fully ready for implementation, and there should be clear will and capacity of the executive bodies and government agencies for the successful implementation of projects, new projects should cover those areas where there is experience of previous successful cooperation, new projects should bring to the country new technologies and best practices, the office said.