Azerbaijani government does not plan to carry out a long-term repayment of foreign debts, attracted with respect to stabilize economy. Vahid Akhundov, the state adviser on economic policy, it would not be so expedient to repay the foreign arrears today, as they are mainly comprised of the loan of the International Monetary Fund and the World Bank. We have opportunities to put the capital attracted in privileged rates in circulation in the world market and obtain profits. Azerbaijan has an opportunity for immediate coverage of its entire debt, but it will be inexpedient, Akhundov underscored.

The Azerbaijani government most recently has held a different position in this respect and was going to repay the debts to the IM. The National Bank of Azerbaijan considered the idea as considered the idea as one of sterilization measures. Moreover, Azerbaijan has long in no need of the IMFs stabilization loan and surplus of the budget. Thus, the stable economic growth and over-fulfillment of public budget indices offers favorable conditions for repayment of debts.

Taking into consideration the task of repayment of the IMF debts and a burden on the budgets over the subsequent years, the repayment of debts ahead of schedule could be an optimal resolution. Thus, only over the first quarter of 2006 Azerbaijan spent $33.4m at repayment of primary debts and interests, whereas annual payment of foreign credits comprise approximately $100-200m a year. The capital saved as a result of repayment of debts ahead of schedule could be directed at the implementation of program of social significance. Moreover the repayment of foreign debts ahead of schedule also affects on increase of investment attractiveness of the country, while the process itself does not excite rise of inflation.

Even the charter of the IMF indicates that the debtor with acute improvement of the financial situation, is expected to clear off credit ahead of schedule. But at the same time for the first time since 1980s the budget of the IMF has turned out in deficit. The year of 2007, as of preliminary data of the IMF, might end with a loss of $88m.

The problems of the IMF started since the moment when many creditors decided to conduct a policy directed at reducing foreign debts. Argentine, Brasil and Russa have repaid their multi-billion debts to the IMF ahead of schedule. As a result of repayment ahead of schedule of the arrears, that Argentine was to clear off through 2008, the county saved approximately $1bn. Brasil, which borrowed the biggest debt in the history of the IMF ($30bn) for stabilization of the economic situation in the country, took the same step. This country repaid its debts two ears ahead of schedule thanks to its reserves, which in 2005 rose to $66.7bn against $15bn in 2003.

In the beginning of 2005 Russia also repaid its debts to the IMF ahead of schedule, remitting $3.33bn to this organization. The Russian Financial Minister Aleksey Kudrin says that through repayment of the loan to the IMF they saved $204m in interests. The remittances were carried out of the Stabilization Fund, where the funds linked with the increase of revenues from the export of Russian energy resources, are accumulated.

In compliance with the schedule of payment in 2005 Russia was to repay approximately $1.3bn to the IMF till 2008. In October 2001 Russia carried out repayments ahead of schedule. Then remitting $2.7bn to the IMF the Central Bank of Russia fully cleared off its debts to this financial institute, while after 4 years the Ministry of Finance repaid its arrears.

The Azerbaijani government decided that today it is unprofitable for the country to repay fully the IMF loan, as thee are a number of public budget articles in need not financing. In difference from Russia, which borrowed funds at commercial rates, Azerbaijan has received the majority of the credits at privileged rates of 0.75-1% a year. At present the government can place the credit resources in the financial market and obtain more and more profits. As to artificial cut in foreign debts, now we are in condition to do it and even repay entire debts, but it is inexpedient, Akhundov stressed.

As of 1 April the foreign debts of Azerbaijan made up $1,741,2m (11% of the GDP), including $151.2m owed to the IMF and $249m to the World Bank, while strategic foreign currency reserves of Azerbaijan made up $2,616m. $1,463,5m of the total falls on assets of the State Oil Company of Azerbaijan, $1,152,5 - on aggregate international assets of the NBA. The reserves under the disposal of the NBA constituted $1,026,6m, which enabled to finance 4.4-moth import of goods and services, excluding the oil and gas sector. It exceeds criteria on international adequacy, adopted in the world practice.

In condition extremely favorable for Azerbaijan the state of the world oil markets enables Azerbaijan to repay the debts ahead of schedule and get released from repayment of interests. After all, it is a very good strategy which targets cut in expenses for repayment of debts. Along with it is necessary to note the positive psychological effect.

However, clearing off the IMFs debts ahead of schedule the government only retains only the privileged character of the credits. The IMF loan approved for Azerbaijan in the period starting from 1995, have been of long-term and privileged character. Thus, over overhaul history of cooperation, the IMF has allotted $335m to Azerbaijan.

Structure of repayment of IMF debts, in m SDR.






Principle debt


















*** As of 20 June 2006 rates of SDR was $1,47299

It is more profitable for credits, including the IMF, if Azerbaijan repays its debts for 4 years more. After all, the interests flood. .

In other way the IMF actually loses its major source of income interests on long-term credits. Generally, the IMF is seriously concerned on cut in demand for its loan. According to foreign economists, the world biggest creditor loses borrowers due to tough terms of crediting, as well as growth of economy in the developing countries. Thus, the IMF approves credits at high rates, including, the loan for covering the operational expenses and fulfillment of reserves. This is the main reason making the borrowers to repay the debts ahead of schedule.

Moreover, the borrowers are frightened mostly by tough terms, that the loans are the loans presented. In accordance with the terms of the agreement, the borrowers are not allowed to repay the debts to other organizers without settling accounts with the IMF. Moreover, the IMF sets requirements on the level of inflation, state of financial situation in the country, while the government is intended to follow the requirements, as it was in case with Azerbaijan.

The western experts guess if the tendency remain unchanged, the world biggest creditor will have to reconsider its credit strategy and inject new model in its economic activities. The level of credits mostly depends on the volume of reserve fund of the IMF, which the organization every year fulfills. Payment of debts ahead of schedule can make the international financial organization increase the rates. At the same time the IMF is not ruled out to cut the purpose level of fulfillment of reserves, as well as cut in interests, which it pays to the IMF member-countries.

Still it is a matter of time what way the IMF will prefer. Maybe, there will be alternative resolutions. The time can work in favor of the IMF and sudden unfavorable economic terms in the developed countries will lead to increase of demand for credits.

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