According to the Accountants and Risk Professionals Association (ARPA), the main risk factor for the stability of the local banking system is the work of the Financial Markets Control House (FMCH) since its protection of the rights of depositors and investors is financed by banks, and this creates a clash of interests. To avoid this, the financing should be passed to the depositors and investors themselves with the introduction of a new tax.
In addition, the financial market is not developed to the extent that it was possible to keep such a regulator as FMCH, although the government has centralized financial supervision. Banks need a donor of liquidity of the assets of troubled banks, and the House is not ready for this, because it is not such a donor, in contrast to the Central Bank of Azerbaijan.
The second group of risks is related to the fact that the banking sector still has not learned to work with the public, Parliament and the regulator – in a quarter of a century, none of the attempts of the Association of Banks of Azerbaijan to defend corporate interests ever succeeded. As a result, the banks are vulnerable to reputation risks and cannot form economic models. In this case the depth of the banking sector (the ratio of its assets to GDP) in Azerbaijan is only 33.8%, while it is 52.4% in Russia, 70-80% in Eastern Europe, and 373.8% in Japan.
The third group of risk is associated with the finance, especially with the currency market. Transfer of the trade of the Central Bank to the trading system in 2011 led to the actual creation of a "tax haven" instead of the market.
The fourth group of risk is about the insurance market. According to the experts, insurers are unable to hedge their currency risks, and the local reinsurance is not able to become a source of foreign exchange inflows into the country.
According to experts, the main causes of the crisis in the local economy are linked to the control system – there is a need to establish close relationships with multinational companies that have significant management experience, to let them into the country to restart its economy. --17D-
Economics
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Azerbaijan’s economy, which is heavily dependent on oil revenues, faces a stark warning in the 2021 report by Carbon Tracker titled “Beyond the Oil States: The Urgent Need to Reduce Dependence on Oil in the Context of the Energy Transition.” The report ranks Azerbaijan among the most vulnerable oil-dependent countries, placing it in the "5th group" — a category reserved for nations expected to experience a decline in oil and gas revenues exceeding 40% over the next decade. This group includes Angola, Bahrain, Timor-Leste, Equatorial Guinea, Oman, and South Sudan, highlighting shared economic risks for these states.
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Azerbaijan's non-oil and gas exports rose 3.5% year-on-year to $2.8 billion during the first ten months of 2024, the Center for Analysis of Economic Reforms and Communication (CAERC) reported in its November "Export Review."
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Azerbaijan Railways CJSC (ADY) will modify the schedules for commuter and domestic trains in line with the Cabinet of Ministers' decision to adjust work and rest days in November, aiming to ensure safe and comfortable travel during the COP29 event, the company announced.
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In Azerbaijan, the government has increasingly relied on tax exemptions for imported goods as a tool to stabilize domestic market prices. The exemption from the 18% VAT on wheat imports, extended this year, exemplifies this approach. New measures have also been introduced, including tax relief on imports of electric vehicle chargers, while exemptions for high-cost medications are currently under discussion. Notably, defense imports continue to be free from taxes and customs duties.
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