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    Fitch Raitings: Low debt still support stable rating of Azerbaijan

    Fitch believes, Azerbaijan's external balance sheet is strong

    Baku. 23 January. REPORT.AZ/ Azerbaijan's introduction of capital controls does not automatically have consequences for its stable rating, Report informs, Fitch international ratings agency's report says.

    Low debt and substantial external assets still support the rating, the agency's report declares.

    The authorities this week imposed a 20-percent tax on some transactions where foreign currency leaves the country.

    "The move reflects the challenge of dual policy goals - preserving the value of State Oil Fund of Azerbaijan (SOFAZ) assets, and supporting the currency to maintain price and social stability," the report states. 

    The measures will support the manat and reduce the pressure on buffers, which are a key strength of Azerbaijan's credit profile, according to the report.

    Fitch believes, Azerbaijan's external balance sheet is strong.

    'SOFAZ assets were nearly USD35bn, 16 months of the country's total imports, at end-3Q15, but the government may be reluctant to use them to defend the manat as SOFAZ finances around half of the state budget and is also meant as a fund for future generations', the report says. 

    'We do not think capital controls will have a material effect on the banking sector due to its already high dollarisation (75% of deposits). Moderate outflows of manat-denominated deposits are possible in anticipation of further depreciation, although the outflow of retail funding in the banking sector in December and January (5%-10% at most rated banks) was manageable because of liquidity buffers', Fitch declares. 

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