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International loans in Azerbaijan: offer more benefits

Analysis Materials 30 March 2012 15:17 (UTC +04:00)
Azerbaijan’s public external debt increased 24.9 per cent in 2011. According to the governmental report as of 2011, the index of the country's external debt reached $4.817 billion as of January 1, 2012, whilst that of January 1, 2011 hit $3.857 billion.
International loans in Azerbaijan: offer more benefits

Azerbaijan, Baku, March 30 /Trend/

Leyla Abdullayeva, Trend Analytic Center Expert

Azerbaijan's public external debt increased 24.9 per cent in 2011. According to the governmental report as of 2011, the index of the country's external debt reached $4.817 billion as of January 1, 2012, whilst that of January 1, 2011 hit $3.857 billion.

This index increased by almost a quarter. It is associated with the expansion of Azerbaijan's cooperation with various international financial organisations, as well as donor countries. As a result, about 12 loan agreements worth about $1.67 billion were signed in 2011 to finance significant projects for the country's economy.

International financial organisations

Number of loans

Sum, mln dollars

World bank

4

175,4

Islamic development bank

2

131,2

Czech Komerční banka

1

318,6

European reconstruction and development bank

1

750

U.S Eximbank and BNP Paribas New York branch

1

116,6

French Sosiete Generale bank and Sumitomo Mitsui bank corporation

1

98

Abu-Dhabi development fund

1

60,7

International Fund for Agricultural Development (IFAD)

1

19,4

Consequently, about a third of Azerbaijan's external debt falls to the debts of the international financial institutions. On the one hand, this part of the external debt cannot be considered as a market one. This makes the structure of borrowing non-optimal.

Looking at this situation from the other side, one should recognise that no financial activity in the world today is implemented without a loan. Therefore, there is a problem with the terms, rather than taking money on credit, borrowing or not.

For example, there is no need for the full support of the state budget and the replenishment of currency reserves. Azerbaijan should fulfil all the requirements of the international financial institutions which are sometimes unacceptable for the country.

Now a transition is being made to more 'point' projects in selected sectors. There are many such areas - education, health, transportation, institutional development. The international banks' funds are ensured by relatively cheap and long term loans, followed by a 'know-how' and experience in solving similar problems in other countries.

Therefore about $2.215 billion fell to concessional loans among the foreign loans used by January 1, 2012. About 3.8 per cent of external debt must be returned to creditors in a period from five to 10 years, 56.4 per cent from 10 to 20 years and 39.8 per cent in a period of more than 20 years.

The country would lose much and fail to do anything without international loans. The most important thing is that international loans allow Azerbaijan not to lose time.

In 2011, the implementation of 10 projects in the construction of roads, seven in the water and sewerage system reconstruction, seven in the social area, six in the electricity sector, five in agriculture, land reclamation and irrigation, four in the financial sector and three in the transport sector and the environment was continued backed up by foreign loans in the country.

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