Azerbaijan, Baku, 22 May / Trend E. Aliyev /
The Executive Board (EB) of the International Monetary Fund (IMF) welcomes the rapid economic growth in Azerbaijan in recent years against the background of external instability, but notes that the most important challenges lie ahead, according to the report of the organization on the basis of completed consultations under Article IV of the Agreement "On creation of the IMF".
"EB believes that high oil prices are currently presenting good opportunities to correct the course of economic policy given the relative strength," the report says.
At the same time, the IMF Executive Board warns that further increase in government spending exacerbates the budgetary dependence on oil revenues and increases the risks associated with the fall in world oil prices.
"Fiscal adjustment can be achieved by improving the efficiency of public spending, including through a better selection of investment projects and by strengthening public financial management and tax collection," the report says.
In a broader sense, the IMF Executive Board calls on the government to amend the fiscal policy in line with the latest IMF guidelines for resource-rich developing countries.
"Strong institutional arrangements in conjunction with best international practices could strengthen fiscal discipline, especially in times of high oil prices, increase financial stability and promote the sound management of oil revenues," according to the report.
The Executive Board of the IMF endorsed the willingness of the Central Bank of Azerbaijan (CBA) to tighten monetary policy if price pressures intensify.
In addition, EB welcomed the efforts to preserve the stability of the financial sector, including through the recapitalization of some banks and the adoption of prudential measures to curb the growth of consumer loans.
The Board supports the efforts of the government of Azerbaijan to make the economy competitive and diversified by 2020.
"The development of non-oil exports will require ambitious structural reforms to reduce barriers for trade and competition, improve the business environment, facilitate the access of private companies to the capital and the fight against corruption and money laundering," the report says.