The incommensurable ambitions of Azerbaijani bankers

As the skyline of Baku prepares to welcome a new architectural marvel, questions about the necessity and timing of such an extravagant investment arise. The 37-storey building of the Central Bank of Azerbaijan, currently under construction on G.Aliyev Avenue, is slated for completion this year. Initiated in 2021 by Tekfen Holding, a Turkish construction firm, the project has accrued a total estimated cost of 637 million manats ($375 million). This staggering figure prompts a closer look into why such an imposing edifice is deemed necessary, especially given the bank's current 16-storey headquarters, constructed in 1998 for $30 million.

The Central Bank justifies the new building by pointing to significant expansion in its operations and staff over the years. Originally designed to accommodate 200 employees, the current headquarters has become inadequate as the bank's activities have diversified and its workforce has grown. As of June 1, 2024, the Central Bank of Azerbaijan (CBA) boasts foreign exchange reserves amounting to $11.7137 billion. Handling such substantial reserves, they argue, necessitates a larger, more modern administrative building.

The new skyscraper, standing at approximately 160 meters with a floor area of 67,926 square meters, is set to become a prominent feature of Baku's cityscape. However, the justification for its $375 million price tag is debatable, especially when contrasted with the more modest facilities of other nations' central banks.

For instance, the Central Bank of Russia, with a foreign exchange reserve of $574.2 billion as of March 1, 2023, operates from an historic two-story mansion in Moscow, dating back to 1731. Similarly, the United States Federal Reserve, an independent federal entity established in 1913, conducts its operations from an old three-storey building, despite overseeing total reserve assets of $535 billion as of May 2024. The Bundesbank, Germany's central bank, which manages securities worth 1 billion euros and a gold reserve of $200 billion, is headquartered in a building constructed between 1967 and 1972. Due to rising construction costs and increased opportunities for remote work, the Bundesbank opted for a more compact reconstruction project in 2022, adding just one new office building of approximately 5,000 square meters.

The disparity between the relatively modest central bank facilities in these major economies and Azerbaijan's ambitious new building is stark. In 2023, Azerbaijan's gross domestic product (GDP) was $73 billion, compared to Russia's $2.5 trillion, Germany's $4.4-4.5 trillion, and the United States' $26.94 trillion. Despite being the smallest economy among these nations, Azerbaijan is constructing the most expensive central bank building.

This penchant for grandeur in administrative buildings is not new in Azerbaijan. Azersu OJSC, the national water operator, moved into a $120 million skyscraper in 2021, despite reporting a net loss of 551.632 million manats the same year. SOCAR, the state oil company, occupies the SOCAR Tower, a 42-storey building that is the tallest in the Caucasus region, costing $414 million amidst declining oil production. The Ministry of Economy's new 33-storey headquarters, costing an estimated $94 million, was completed during a period of economic downturn, with GDP shrinking by 4.5% since the beginning of the yea , and according to IMF forecasts, it will continue to decline.

These developments raise concerns about the prioritization of funds, particularly when social indicators for the Azerbaijani population remain low. The lavish expenditures on administrative buildings seem incongruent with the economic realities faced by the industries they house. The construction of such costly edifices amidst fiscal constraints suggests a misalignment between the management's spending priorities and the sectors' financial performance. While the new Central Bank building may symbolize growth and modernization, it also highlights the need for prudent financial management and alignment of expenditures with economic realities.

The new building of the Central Bank of Azerbaijan will be 170 meters high. © Photo : Facebook / Azerbaycan Respublikası (https://az.sputniknews.ru/)