Economic Council highlights priorities: Agrarian sector and Islamic banking

The Economic Council headed by Azerbaijani Prime Minister Ali Asadov held a regular meeting on 8 April to consider issues of paramount importance related to macroeconomic stability and financial sustainability, the government portal reports.

Central to the agenda were discussions on the main directions of monetary policy, the evolution of the banking and insurance sectors, the dynamics of agricultural production, the challenges of food security, efficient land use and the prevailing status of agricultural exports. Notably, the Council scrutinised the strategic objectives and obstacles for the period 2024-2030, as well as initiatives aimed at developing Islamic banking and introducing an automated risk analysis system using artificial intelligence in the customs system.

During the exchange of views, Central Bank Chairman Taleh Kazimov, Agriculture Minister Mejnun Mammadov, State Customs Committee Chairman Shahin Bagirov and Deputy Economy Minister Samed Bashirli presented comprehensive reports explaining the relevant areas.

Meanwhile, the Turan Agency's report emphasises a worrying trend in agriculture, pointing to a significant shortfall in the production of major agricultural commodities in recent years. Despite a sharp increase in grain production in 2023, including wheat, green tea leaves, tobacco and cocoons, there has been an overall decline in the production in several key categories including potatoes, melons, sunflower and cotton over the past 5 years, which requires urgent attention from policymakers.

When it comes to the prospects for Islamic banking, a concept that has historically faced institutional obstacles. While initial progress has been made in establishing a legislative framework between 2017 and 2020, the current situation shows a perceptible decline in interest, partly due to the entrenched banking regulations favouring conventional lending methods.

Efforts are underway to stimulate interest in the Islamic finance, and the Central Bank is developing a conceptual roadmap to 2026 based on the principles of inclusive access to finance. Drawing inspiration from global examples such as Malaysia and Turkey, Azerbaijan is endeavouring to introduce Islamic banking, initially by establishing an "Islamic window" in conventional banks.

However, the tempered enthusiasm for Islamic banking highlights a broader reticence in domestic financial circles, where conventional lending paradigms reign unchallenged. Nonetheless, proponents argue that diversifying banking procedures can strengthen Azerbaijan's resilience to future economic vicissitudes, as evidenced by lessons learnt from the 2010 crisis.--