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IMF: Azerbaijani government takes a number of actions against external shocks

15 September 2016 09:08 (UTC +04:00)

According to IMF, with reserves falling and external shocks intensifying, the Central Bank of Azerbaijan (CBA) devalued the manat: “The devaluations helped to improve competitiveness but worsened bank balance sheets and increased dollarization. The authorities have started to close problematic banks, restructure the largest state bank, launched a reform of the financial supervision architecture and added new macro prudential limits on dollar lending”.

“Public sector wages, overall pensions, and social protection expenditures have been increased. To limit inflationary pressures, the CBA has tightened the monetary stance in 2016, raising the refinancing rate by 1,200 basis points to 15.0 percent”, the IMF said.

Executive Directors welcomed the steps the authorities have taken to adjust to the decline in oil prices: “However, the difficult external environment could hamper macroeconomic outcomes in the near term”.

Accordingly, Directors stressed the need to press ahead with reforms to secure macroeconomic and financial stability and promote a diversified and private sector-led economy.