Azer­bai­jan's econ­omy hit by neg­a­tive shocks: IMF

The Pak Banker - - COMPANIES/BOSS -

A staff team from the In­ter­na­tional Mon­e­tary Fund (IMF) led by Mo­hammed El Qorchi vis­ited Baku dur­ing Jan­uary 28-Fe­bru­ary 3, 2016, on a fact-find­ing visit and to dis­cuss ar­eas of tech­ni­cal as­sis­tance co­op­er­a­tion. At the con­clu­sion of the visit, Mr. El Qorchi said Azer­bai­jan's econ­omy has been hit by a se­ries of neg­a­tive shocks, in par­tic­u­lar, a marked drop in oil prices, a sig­nif­i­cant growth slow­down and cur­rency de­pre­ci­a­tions in trad­ing part­ner coun­tries. Growth was strong in the first half of 2015 but de­clined in the se­cond part of the year while the cur­rent ac­count sur­plus evap­o­rated.

The au­thor­i­ties have taken a num­ber of ac­tions in re­sponse to the wors­en­ing ex­ter­nal en­vi­ron­ment. With re­serves fall­ing and ex­ter­nal shocks in­ten­si­fy­ing, the Cen­tral Bank of Azer­bai­jan (CBA) de­val­ued the manat, and shifted to a man­aged float ex­change rate regime. The de­val­u­a­tions helped to im­prove com­pet­i­tive­ness. Since then, the CBA has al­lowed greater ex­change rate flex­i­bil­ity, have taken mea­sures to pre­vent cap­i­tal out­flows, and pro­ceeded to merge and liq­ui­date some prob­lem banks. At the same time, the govern­ment has started to ad­just fis­cal pol­icy to the fall in oil rev­enues. Pub­lic in­vest­ment, which boomed when oil prices surged, has been low­ered while new rev­enue gen­er­at­ing fis­cal mea­sures have been in­tro­duced. Also, to pro­tect the vul­ner­a­ble, old-age pen­sions and tar­geted so­cial as­sis­tance have been raised. Fi­nally, a num­ber of pri­or­ity struc­tural re­forms to im­prove the busi­ness en­vi­ron­ment have also been an­nounced.

Look­ing ahead, eco­nomic growth and bal­ance of pay­ments pres­sures are likely to re­main ma­jor chal­lenges for the au­thor­i­ties in the near term. How­ever, the au­thor­i­ties are well placed to over­come th­ese chal­lenges, pro­vided they fur­ther strengthen their pol­icy re­sponse and given Azer­bai­jan's sub­stan­tial buf­fers.

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.