Our Analytics 19 september — 13:55

At meeting with Ilham Aliyev IMF talked about crisis of banks (Our comment)

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BY MAMMAD EFENDIYEV, ECONOMICS SECTION

If until now only the official bodies talked about the re-emerging economy, which provoked the sceptics' gossip, this time the International Monetary Fund (IMF) expressed its attitude to the reforms in Azerbaijan. In particular, the IMF appreciates the measures taken by the government to minimise the impact of a sharp drop in oil prices and stabilise the macroeconomic situation. This was stated by Director of the International Monetary Fund's (IMF) Middle East and Central Asia Department Jihad Azour during a recent meeting with Azerbaijani President Ilham Aliyev.

Systematic consultations of the countries of the world with the international financial regulator present very useful discussions for both sides. And they are, of course, conducted not for the sake of form, but for the purpose of maintaining stability both in the global financial system and in the economy of an individual party. This allows the IMF to be aware of the financial and economic situation in each country, the analysis of which provides an opportunity to judge the upcoming trends and make appropriate forecasts. And each such meeting gives us the most complete information about the current state of our own economy and the prospects for its development.

And in this respect Azour was clear and principled. According to him, in 2016 the economy of Azerbaijan decreased by 3.1%. But by the end of this year, the recession is likely to decrease by 1%, and next year the economy will resume growth, and GDP will increase by 2%. True, this forecast is only preliminary and, as expected, can be adjusted by the end of this year. More accurate forecasts can be corrected by the IMF after it gets acquainted with the draft state budget of Azerbaijan for 2018, which will soon be submitted to the Milli Majlis (Parliament) for discussion.

Azour appreciated the great work done by the government to restore the economy after the fall in oil prices. Moreover, it is simply impossible to accuse him of any bias, so his words should be taken with attention. The IMF and Azerbaijan do not have any financial relations. Rather Baku has not borrowed funds from this international organisation since 2005, and the debts have been returned long ago. Therefore, we can only talk about honest confidential negotiations. And Azour directly noted that the country had carried out major reforms, and the economy began to recover. The situation is gradually normalising, monetary stability is achieved. All this, of course, is good, and as a balm is poured into the hearts of every Azerbaijani.

At the same time, he also stressed that inflation is still at a two-digit level, it must be reduced to one-digit. But especially the representative of the IMF called for further restructuring of the banking sector, since the country's economic recovery depends on this.

By the way, this circumstance has repeatedly been stressed Azeri Daily experts in their analytical calculations. Unlike us, the IMF representatives discussed the restructuring of the International Bank of Azerbaijan (IBA) and the entire banking sector as a whole within the framework of meetings with the leadership of the Ministry of Finance, the Chamber for Supervision of Insurance Markets and the Central Bank. And, we think, these meetings will help at least somehow move the banking sector of the country forward.

In general, the IMF is pleased that the government has taken serious steps to resolve the issue with troubled banks. The Fund believes that the restructuring of the banking sector will positively affect its sustainability, increase confidence in the financial and banking sector, and reduce budgetary risks. But at the same time it calls for support of banking activities. Comments here, as they say, are unnecessary: for the harmonious operation of the economy, it is urgent to restore its banking system.

An important condition for the development of the country's economy is also de-dollarisation, but it can become possible only after restoration of confidence in the manat. And here not the last role should be played by banks. For this we need, first of all, strong and stable macroeconomic framework, low budget deficit, high currency reserves of the Central Bank.

In the current conditions, a decrease in the level of dollarisation will significantly strengthen the economy and the banking system. But the work of banks in this direction leaves much to be desired. Therefore, the IMF calls for the need to continue the restructuring of the banking system. Moreover, to ensure the stability of banks, the world regulator considers necessary even such complex steps as the adoption of new legal acts. It seems that we will not see a well-tuned banking system very soon.

But, once again, all the IMF forecasts are preliminary. In the first half of December this year, the IMF mission will visit Azerbaijan to conduct consultations with the Azerbaijani government in Baku on a specific article of the IMF's Statute-IV. During the forthcoming visit, discussions are planned on the country's budget forecasts for 2018, macroeconomic indicators and the outcome of the economic reforms. That's when the IMF will be able to find out the results of measures taken by the government, which can have an impact on its forecasts for the country.

Over the remaining three months, Azerbaijan's economic performance is expected to rise even higher. And the revised forecasts of the IMF, we think, will please us even more, which will be served not only by reforms within the country, but also by relatively favourable oil prices on the world market. But whether our banks will be able to catch up to these indicators is very difficult to say. And what can be said about the banks run by the Central Bank, many of whose powers are transferred to the Chamber of Financial Market Supervision. And the powers of the latter, in turn, have recently been severely limited and transferred to a different structure.

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