Financial market

Weekly review of key events in the Azerbaijani financial market

December 20, 2021 4:21 p.m. (UTC + 04:00)

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Through Tendency

The board of directors of the Central Bank of Azerbaijan (CBA) last week decided to increase the interest rate from seven percent to 7.25 percent, Tendency reports.

At the same time, the upper limit of the interest rate range fell from eight percent to 8.25 percent, while the lower limit remained unchanged at six percent.

Azerbaijan’s strategic foreign exchange reserves increased 4.4% ($ 2.2 billion) from January to November 2021 and reached $ 53 billion.

ABC reserves rose 10.2% to over $ 7 billion.

According to the ABC, if current trends continue, a large balance of payments surplus is expected in 2022.

In addition, last week, the BCA said that the share of the Turkish lira in the assets and liabilities of the Azerbaijani banking system is insignificant and therefore the change in the rate of the Turkish currency will not affect the position of the Azerbaijani banking system.

According to the ABC, macroeconomic and financial stability is maintained in Azerbaijan.

“The rapid growth of non-oil exports and the surplus in the balance of payments, formed amid favorable world oil prices, keep the foreign exchange market in balance. Improving expectations comes with a decline. dollarization, ”the ABC said. “Under these conditions, the depreciation of the Turkish lira does not affect the relationship between supply and demand in the foreign exchange market and the manat rate against the US dollar. Changes in the Turkish lira rate do not have no significant impact on inflation in Azerbaijan. “

In addition, the BCA noted that the depreciation of the Turkish lira may temporarily change its share in various bank transfers against other currencies.

“However, changes in the geography of transfers or the current structure are not expected to have a significant impact on Azerbaijan’s financial system as a whole,” the Central Bank added.

According to the ABC baseline forecast, the inflation rate will stabilize from the first quarter of next year while from the second half the inflation rate will exceed the upper limit of the target range.

“According to official statistics, the monthly inflation rate in November was 1.5% compared to 11.1% over 12 months,” ABC said. “The average annual inflation rate was 6.2% while the average annual base inflation rate was 3.9% from January to November 2021. The inflation rate continues to rise in all sub- groups of goods and services. “

In addition, the CBA pointed out that the consumer food price index rose 1.9% in November compared to the previous month while the annual food inflation rate was 14.9%. . The average annual food inflation rate reached 7.4 percent in the first 11 months of this year.

According to last week’s report, the European Bank for Reconstruction and Development (EBRD) will expand access to finance for small and medium-sized enterprises (SMEs) in Azerbaijan.

The EBRD has announced its intention to grant the Azerbaijani Bank Respublika a loan amounting to $ 13.5 million, which will help to double support to the banking sector in Azerbaijan.

“The first line of credit in the amount of approximately $ 9.5 million will be provided under the Azerbaijan Agricultural Finance Facility. This mechanism, supported by EU funds, aims to expand the financing of the agricultural sector in Azerbaijan, which will accelerate its development, ”noted the EBRD.

In addition, according to the bank, another line of credit worth about $ 4 million will be given to SMEs in Azerbaijan.

The change by the VISA payment system of part of the interbank commissions when paying for goods in Russia will not affect the countries of Central Asia and Azerbaijan. Decisions on pricing matters are made in different regions, and any changes in Russia will not affect countries in Central Asia and Azerbaijan, a representative from VISA said.

Last week, the Asian Development Bank (ADB) revised its GDP growth forecast for 2021 upwards from 4.1% to 4.7%, reflecting an improved outlook for Azerbaijan, Georgia, Kazakhstan, Tajikistan and Uzbekistan due to their generally robust recovery in the first three quarters of the year.

It was also reported that during the visit of the regional operations manager of the Islamic Development Bank (IDB) Farid Ahmed Khan to Azerbaijan, representatives of the bank visited the Ministry of Digital Development and Transport. The parties discussed current cooperation issues, as well as potential projects that can be financed by the Islamic Development Bank during the meeting with the delegation.

In addition, the bank’s support for projects in the field of transport, “Smart City”, “Smart Village”, particularly in the field of urban transformation, the possibility of obtaining technical support from the bank in the field of digital transformation were discussed.

The Islamic Development Bank has expressed its intention to cooperate in the financing of specific projects in the field of ICT, transport and infrastructure in the Azerbaijani region of Karabakh.

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