IMF Mission Head: New National Currency Introduction Reduced Inflation Growth Rate in Azerbaijan

Business Materials 6 September 2006 21:22 (UTC +04:00)

The International Monetary Fund (IMF) forecasts that the inflation rate in Azerbaijan as results of 2006 will make up 12 per cent. However, these forecasts were made in April 2006, and they are realistic, since the consumer prices growth rate in August was at the level of 12 per cent, Vitaly Kramarenko, Deputy director of the IMF Middle East and Central Asia Department, the head of IMF mission told journalists during the press conference today,Trend reports.

However, according to him, the introduction of the new national currency has reduced the inflation rate. The less denomination, the more people seek collect national currency, he told.

According to him, the inflation rate growth was triggered by the significant increase in the state expenses (as a result of the budget 2006 forecasts` correcting, the state expenses are expected to increase on 70 per cent). That caused the raise in the currency convertation.

Mr. Kramarenko thinks that the National Bank of Azerbaijan (NBA) should take all possible measures within the monetary policy to contain the inflation rate. IMF mission recommended NBA to follow the growth in the money supply and guarantee flexibility.

Our recommendations to Azerbaijani Government will allow reducing the inflation rate down to one-digit rate, or a little higher than 10 per cent, he told.

Mr. Kramarenko thinks that it is insufficiently verified to forecast the inflation rate for the next six months because of changes in the economy of the country. Among other causes which have an influence on the inflation rate, he told the increase in the currency incomes to the state budget, and thinks that the government should not possess the all the currency reserves.