The International Monetary Fund (IMF) supports measures to limit consumer lending in Azerbaijan, said Raja Almarzoqi, head of the IMF mission for the country.
"We appreciate the aspiration of the Central Bank of Azerbaijan (CBA) to preserve the neutrality of the monetary policy, as well as its initiatives to limit the growth of consumer lending as correct. At the same time, the consequences of such measures should be controlled. Recent actions taken by the Central Bank to strengthen the financial control rules will support financial stability. But there is a need for additional measures to improve the endurance of the system," he told reporters in Baku.
Almarzoqi said the rapid growth of consumer lending mainly creates risks for borrowers.
"In this regard, a decrease in the share of consumer loans would be beneficial amid the increase in the share of lending to the private sector and SME," he said. "There are very high interest rates in the consumer lending segment and, as a consequence, the margin of banks. Of course, the limitation of this segment does not mean that the banks will immediately start lending to businesses. But if one limits the profitability, the banking sector will begin to look for other opportunities to gain profit."
Almarzoqi went on to say that Azerbaijan's successful debut placement of sovereign Eurobond in the background of the market environment in the region shows the investors' confidence in the fact that the management of oil revenues is performed in a balanced way.
"The main challenge facing the country is to reduce dependence on oil revenues and give an impetus to the development of private sector as the driving force of the diversified economic growth," he said.
He also noted that the country's short-term economic prospects are favorable.
"The non-oil sector is expected to grow to eight percent of the GDP and the inflation is expected to remain at one-digit level in 2014-2015. The main risk is a possible reduction in oil prices," he said.
Almarzoqi said the IMF supports the tougher fiscal policy envisaged in the state budget for the current year.
"The goal is to consolidate the budget and reduce dependence on oil revenues by means of further decline in transfers from the State Oil Fund of Azerbaijan (SOFAZ). The revenues of the state budget generated by the private sector should grow. It will facilitate the creation of a strong buffer for the national economy in case oil prices fall," he said.
Almarzoqi also highlighted the need for cutting public spending.
"This can be achieved by increasing the efficiency of state investment, and determining the priority of various large-scale investment projects. If the business climate continues to develop in this background, then the economic growth of Azerbaijan will grow healthier," he added.
ANN.Az
