Fitch talks reasons for improving outlook on Azerbaijan's sovereign rating
Baku, Azerbaijan, March 1
By Anvar Mammadov - Trend:
The international rating agency Fitch Ratings has explained the reasons for improving the outlook on Azerbaijan’s sovereign rating.
Amelie Roux, director sovereign and supranational rating analysis at Fitch Ratings, said the agency identifies three main reasons for improving the forecast for the rating.
Fitch raised the outlook for Azerbaijan’s sovereign rating from “negative” to “stable” a month ago, Roux said at an annual meeting of Fitch Ratings in Baku March 1.
The main reasons for this are the gradual decline in the level of dollarization in the country, the stabilization of manat rate since April 2017 and, as a result, the growth of confidence in it, as well as the process of restructuring the International Bank of Azerbaijan, which had a positive impact on the banking sector as a whole, she noted.
She noted that the stabilization of the manat rate had a positive impact on prices for consumer goods, and also led to increased confidence in manat.
"As a result, the dollarization of both loans and deposits began to gradually decline and amounted to 70 percent and 40 percent, respectively, at the end of the year. Another factor that affected our forecast was the return of Azerbaijan's current account to the surplus, which was affected by higher oil prices, as well as the growth of non-oil exports, particularly, the export of agricultural products, which increased by 31.3 percent in the first three quarters of 2017 compared to the same period of 2016. Fitch expects that the surplus of the balance of payments will be 3.1 percent at the end of the year," she said.
According to Roux, this, in turn, had a positive impact both on the gold and foreign currency reserves of the Central Bank of Azerbaijan, and on SOFAZ reserves, which grew by 22 and 8 percent, respectively.
Roux also noted the positive impact of the restructuring of IBA, which will be completed soon.
“Along with the restructuring of external liabilities worth $2.3 billion in July 2017, the bank issued bonds worth $1 billion. A part of the bank’s toxic assets was transferred to the Aqrarkredit non-bank credit organization in 3Q17. Thus, the transferred toxic assets amounted to 14 billion manats (20 percent of GDP). The government intends to transfer a small part of toxic assets until the end of the first quarter,” Roux added.