Azerbaijan Needs Help from IMF

The mission of the International Monetary Fund for Azerbaijan, headed by Mohammed al-Gorchi, holds consultations in Baku under Article IV of the Fund, which provides for the assessment and discussion of the financial and economic indicators of the country.

After a meeting with the mission on Thursday, the Minister of Finance Samir Sharifov hurried to assure journalists that the Azerbaijani government is not going to borrow from the IMF, which was reported by the world's media, Financial Times, Reuters and Bloomberg earlier this year.

The sum of 4 billion dollars is reported, of which 3 billion is requested from the World Bank.

 "The ministry is discussing with the international financial institutions assistance issues and makes important decisions related to the banking sector. We give loans to other states. If someone sees this in a different way, I associate it with their ethics. Azerbaijan participates in the IMF in order to be able to contact them at all times. Once again, about any aid package there could be no question," Sharifov said at a press conference on Thursday.

Earlier,  on 29 January - 3 February the mission headed by Gorchi visited Baku and said that in the near future the authorities will be faced with serious problems, economic growth and the balance of payments will be subject to serious pressure, however, the authorities may well overcome these problems, if they take the necessary measures. Priority actions include the formulation of long-term plan for fiscal consolidation, strengthening the monetary policy and the transition to a flexible exchange rate, strengthening the financial sector and supervision, as well as structural reforms to diversify the economy.

The IMF supported the government's intention to further reduce public investment to more sustainable levels in 2016 and agreed to maintain close political dialogue and to strengthen technical assistance.

According to Turan, the visit is based on the Framework Document of Partnership (CPF) with Azerbaijan on 2016-2020. It was approved on July 21, 2015 by the Board of Directors of the World Bank, and published on 4 August. CPF is intended to regulate the WB operation unit - the International Bank for Reconstruction and Development (IBRD), the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA) for the maintenance of sustainable, inclusive and focused on private sector development in Azerbaijan.

The framework document was finally made after consideration of the WB and the IMF Financial Sector Stability Assessment (FSSA) of Azerbaijan, which was held 2-17 March 2015 immediately after the devaluation of the manat.

Turan, citing sources reported that the government has not been able to get guarantees for financial assistance. First of all the authorities are interested in attracting large investments of private capital into the non-oil sector. However, this requires a capital guarantee that the current political system of the country cannot provide due to the vertical state control over all spheres, not free judiciary, crackdown on civil society and the media, and the lack of transparency. This and other problems are negotiated by the international institutions, and the solution is crucial for the flow of investments to Azerbaijan. The government needs investment of, at least, 10 billion and, at best, 20-30 billion, according to sources of the agency.

In April this year, IMF published a forecast on Azerbaijan for 2016, predicting a fall in GDP by 3%, inflation - 12.8%. Balance of payments deficit will be 0.2% of GDP.

According to Turan, WB is currently implementing 51 projects in Azerbaijan and has allocated loans totaling $ 3.6 billion, of which 35 have been completed, and the implementation of 16 continues. IMF allocated loans totaling $ 363 million until 2009. Further funding has been suspended at the initiative of the Azerbaijani side, which believes that it needs no recommendations of this organization. In 2013, the government ignored IMF warnings about the dangerous situation in the International Bank, which threatened to undermine the stability of the entire banking system, which is what happened in 2015.   -0-