Our Analytics 4 march — 13:44

Finance minister dissatisfied with the rating (Our comment)



Azerbaijani Finance Minister Samir Sharifov expressed dissatisfaction with the level of the country's credit rating, which was established by leading international rating agencies. According to him, our country should be assigned a higher investment rating, since Azerbaijan has successfully solved its problems that arose after the economic crisis. In particular, the government has solved the problem of debt, foreign exchange reserves have increased significantly, which, of course, is the reason for raising the country's rating.

Samir Sharifov

Indeed, such leading rating agencies as Standard&Poor's, Moody's and Fitch lowered Azerbaijan's credit rating from BBB- to BB+ earlier. At one time this, of course, was justified. The deep crisis that engulfed the entire world economy did not bypass Azerbaijan. The two large-scale devaluations of the manat that followed one after another paralysed the country's banking system. And soon the entire economy as a whole. During this period, leading international rating agencies decided to lower the country's rating level. At that time it could be understood.

But the government of the country, together with the Central Bank, took a number of targeted measures, and in a short time took the economy out of a dangerous situation. Within two years, it was possible to solve the problem of external debt, which was especially aggravated by the state of the International Bank of Azerbaijan. Foreign exchange reserves both in the Oil Fund and in the Central Bank have grown significantly, the amount of which today is much more than 40 billion manats, exceeding the pre-devaluation level. And deep reforms in the economy made it possible to significantly raise the standard of living of the population. It took only two years to curb the hyperinflation that hit the country and reduce it from 14% to a normal level of 2-3%. And since the beginning of this year, a whole cascade of presidential decrees aimed at solving the social problems of the population has fallen upon us. The level of minimum pensions, wages, benefits has increased significantly... And more recently, President Ilham Aliyev has also solved such a complex issue as bad loans. But on this, as follows from the statements of the head of state himself, the government does not intend to stop. And according to incoming information, such large-scale reforms that the country has long dreamed of are expected soon.

But it just does not fit with a low international rating level. And the government's natural discontent with the situation is easy to understand. Each work must find a decent score. As the knowledge of the student is deservedly evaluated by teachers, so the state of the national economy should be accurately reflected in its rating. Therefore, one thinks, it is time to raise the rating of Azerbaijan by at least one level. The country successfully solved its problems after the economic crisis, which entailed a decrease in its rating, and now it would not hurt to raise it to the previous level of BBB-.

And we can confidently say that it is not long to expect this. Thus, one of the largest international rating agencies, Fitch Ratings, is already forecasting a 3.5% growth in Azerbaijan's economy this year, approving the long-term issuer default rating of Azerbaijan in foreign currency at BB+ and a stable outlook. The agency names the factors contributing to the growth of GDP in Azerbaijan. Moreover, here in the same line both the oil and non-oil sectors follow, they are already evaluated as equivalent areas by international analysts. In particular, gas exports under the Shah Deniz-2 project and increased investment in connection with the extension of the agreement on the division of hydrocarbon production on ACG will support GDP growth in Azerbaijan. Also, both tourism and agriculture will stimulate the development of the non-oil sector of the country. Increased Russian demand for agricultural products from Azerbaijan, a sustainable tourism sector, and the launch of carbamide and other plants will stimulate the export of non-oil products and services.

True, the same Fitch Ratings assessed the state of the banking sector of Azerbaijan as extremely weak. At the same time, although it notes some improvement in this sector after restructuring in 2017, it reminds that at the end of 2018 problem loans amounted to 17%. But this problem, as we have already noted above, has already been solved. And at an unprecedented high level. It seems that the solution of this extremely difficult problem for the banking system will entail a sharp all-round growth of this sector. Removed, so to speak, is the last obstacle. Consequently, there is no longer any reason or pretext for the further discrepancy between real achievements and the corresponding ratings.

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