EBRD can further allocate manat loans to local companies

The European Bank for Reconstruction and Development (EBRD) is ready to consider the possibility of further allocating manat loans to Azerbaijani companies, Head of EBRD Baku office Ivana Duarte told Trend.

"The development of local capital markets and local currency lending is among our top priorities in Azerbaijan. Companies, which have revenues predominantly in domestic currency, should ideally not be exposed to foreign exchange-related risks," she said.

Duarte also talked about the process of issuing manat bonds in Azerbaijan.

"This is a process, which depends on the availability of necessary legal framework as well as the right market conditions. Once all the necessary elements of this jigsaw are in place, we’ll make relevant disclosures and announcements about manat denominated bonds," she said.

Duarte confirmed that the EBRD is working with relevant authorities on resolving these issues and making this happen.

In late 2017, the EBRD allocated the first corporate loan for Azerbaijan in manats. The loan was allocated for METAK company, the producer of plastic and metal pipes. The loan amount was eight million euros in manat equivalent.

The EBRD’s Local Currency and Capital Markets Development (LC2) Initiative, launched in 2010, aims to strengthen local capital markets and to encourage the use of local currencies in the countries where it works.

Local capital markets development has always been high on the transition agenda for the countries where the EBRD invests. Local capital markets provide a reliable source of funding, thereby contributing to financial resilience and sustainable growth.

Together with local authorities, regulators and market participants, the EBRD has been working hard to reduce reliance on foreign currency lending and borrowing.

The EBRD invests in debt capital-market instruments as well as equity. These transactions promote higher standards of corporate governance while also fostering capital market development and promoting alternative sources of financing.

The EBRD also issues its own local-currency-denominated bonds, or bonds linked to local currency, on the international and domestic markets for its funding purposes.

As an example during 2016 it issued the equivalent of 509 million euros denominated in or linked to eight local currencies.

The EBRD first lent and issued bonds in a local for a country currency (Hungarian forints) in 1994. Since then EBRD’s wide bank operations in local currency have increased significantly.

Azerbaijan has been cooperating with EBRD since 1992. In Azerbaijan, the EBRD focused on supporting local corporates with direct financing while helping partner banks in on-lending to MSMEs, supporting partner banks in the development of new financial instruments to target improved access to finance for women-owned and -run businesses, promoting competition and improving the business environment to deepen reforms, pursuing investments in energy projects that improve efficiency and energy security.

In order to support the authorities’ goals of promoting competition and improving the business environment, the EBRD prioritizes engagement with private and public sector clients who can demonstrate commitment to high standards of corporate governance and transparency and who have a commitment to improving management practices.

So, the EBRD's investments in Azerbaijan in the first four months of 2018 increased by 253 million euros and at the end of April 2018 totaled 3.07 billion euros.

The bank reported that as of January 1, 2018, the EBRD allocated 2.817 billion euros to Azerbaijan.

The number of active EBRD projects in Azerbaijan was 48, and in total, the EBRD has implemented 165 projects in Azerbaijan. The portfolio of active projects at the end of April 2018 amounted to 1.429 billion euros, which is 21.5 percent more than at the end of 2017 year.

Almost half of the EBRD’s active portfolio in Azerbaijan - 707 million euros or 49.5 percent – fell on the energy projects, 42.5 percent or 607 million euros – on the infrastructure projects, and 4.9 percent (70 million euros) – on the industrial, commercial and agribusiness projects. Another 3.1 percent (45 million euros) fell on projects involving financial institutions.

It’s vital to note that the EBRD is not only operating in the capital city. In fact, 23 percent of the projects are outside Baku.