"Report" experts: This time, banking sector should take a risk - ANALYSIS

Baku. 27 April. REPORT.AZ/ The main reason of delaying economic activity is due to the high level of dollarization and conversion of manat into foreign currency.

Analytical Group of Report News Agency believes that, to prevent it in the first place confidence in the national currency must be restored: "As we can see, even the minimum level of bank interest rates unable to change the situation.As a result, money supply fell from the maximum limit of November 2014 decreased by 50.4% to 8.686 billion AZN on March 1, 2016."

According to analysts of the agency, two devaluations in 2015 increased the level of dollarization. Thus, deposits in manat as of March 1, 2016, reached 4.179 bln AZN, while deposits in foreign currency reached 17.107 bln AZN. In other words, dollarization rate exceeded 80%. It is necessary to increase manat supply in order to increase economic activity. However, the Central Bank of Azerbaijan (CBA) still can't achieve this.

"Last week, the Chamber of Control over Financial Markets supported CBA's strategy and associated this with stimulation of inflation in the money supply, increase in imports and the increase in demand for the currency and depletion of foreign exchange reserves", said the experts.

Analytical Group of Report News Agency states that the process of restoration of confidence in the national currency in those countries where devaluation happened takes an average of 4-5 years.This in turn leads to weakening of the economic growth rate during this period. The way out of the situation is transfer of foreign currency assets into national currency, but it also can occur in a fixed currency regime.

Transition to the national currency of course, does not happen because of "floating exchange rate" mode. In this case, the CBA has to deal with commercial banks. In a word initial state support is important for business projects to boost economic activity.