In response to the COVID pandemic, monetary policy in Azerbaijan has been appropriately eased, Report informs referring to a report by the International Monetary Fund (IMF) following consultations with the Azerbaijani government under Article IV of the IMF’s Articles of Agreement.
“Interest rate cuts, in the context of the de facto peg to the US dollar, and the easing of prudential regulation usefully complemented fiscal relief during the pandemic and kept credit flowing. However, amid weak monetary transmission, bank lending rates eased only moderately and remain relatively high,” reads the IMF Staff Concluding Statement of the 2021 Article IV Mission.
Following the easing during the pandemic, gradual normalization of bank prudential and regulatory measures needs to be continued, according to IMF economists.
“However, this normalization should proceed carefully, in line with progress in combating the pandemic and re-opening the economy. Further improvements in the CBA’s (Central Bank of Azerbaijan) policy frameworks and initiatives to develop financial markets and improve financial intermediation and access to finance would provide additional support to the diversification of the economy and improvements in its productivity and resilience,” the IMF mission noted.
At the same time, the CBA’s ongoing efforts to improve financial oversight should continue, supported by cooperation with international financial organizations through technical assistance, reads the statement.