Weekly economic review (Nov. 9-13)
EBRD recommends Azerbaijan to improve supervision in financial sector
Azerbaijani authorities should improve supervision in the financial sector, according to the European Bank for Reconstruction and Development (EBRD).
"Necessary steps include improvements in corporate governance, risk management and monitoring in banks, the phasing out of directed and related party lending, and restructuring the International Bank of Azerbaijan to pave the way for its eventual privatisation," EBRD said in its 2015 Transition Report.
EBRD specialists believe that diversification of the economy remains a key priority for Azerbaijani authorities.
"Development of the non-oil sector will depend on a stable macroeconomic environment, as well as a concerted effort to foster competition and improve the business climate," according to the Transition Report. "Diversification is all the more essential in the context of the protracted negative terms-of-trade shock due to low energy prices."
Meanwhile, the EBRD experts believe that in light of lower growth rates, conservative budget planning and prudent oil wealth management are even more essential.
"Growth prospects continue to be influenced by the dynamics in the oil sector and its linkages with the non-oil sector of the economy," noted the Bank's experts.
"A low oil price environment enhances the importance of vigilant fiscal and monetary policy formulation," EBRD said. "Structural reforms and a forwardlooking approach to infrastructure spending are key to enhancing economic resilience, including through decreased break-even fiscal and external prices of oil."
EBRD believes that Azerbaijan should tailor budget planning to new fiscal constraints and target sound returns and fiscal multipliers in the context of implementation of the public infrastructure development agenda.
Throughout the cooperation with Azerbaijan, EBRD has allocated 2.3 billion euros to the country for implementation of around 160 projects.
One of the main tasks of EBRD is to ensure a stable development of Azerbaijan's non-oil sector by investing in the small and medium-sized private enterprises.
Azerbaijan is the largest recipient of EBRD funds in the Caucasus, as well as one of the largest recipients of this organization's funds in the CIS and Eastern Europe.
EBRD invested 238 million euros in implementation of 21 projects in Azerbaijan in 2014.