Statement at the Conclusion of an IMF Staff Visit to AzerbaijanPress Release No. 12/164
May 9, 2012
An International Monetary Fund (IMF) staff mission visited Baku during April 24-May 2, 2012, to discuss government policies, prospects for the Azerbaijani economy, and issues for the 2012 Article IV Consultation mission1, which is tentatively planned for October. The IMF team met with senior government officials and non-government representatives.
At the conclusion of the visit, the mission chief for Azerbaijan, Mr. Nadeem Ilahi, made the following remarks in Baku today:
“Near-term economic prospects are generally favorable. Non-oil economic growth is projected to reach 6 percent in 2012, though hydrocarbon output is not likely to increase. Inflation, which has moderated recently in line with global food prices, could reach 5 percent by year-end.
“Prudent fiscal policy is key to preserving near-term macroeconomic stability. Reducing the non-oil fiscal deficit by restraining capital spending would help keep inflation in check in 2012. The mission welcomes the authorities’ intention to avoid a supplementary spending increase this year in response to recent and prospective rise in global oil prices.
“A flattening profile of Azerbaijan’s hydrocarbon output underscores the need to embark promptly on a fiscal consolidation path to achieve fiscal sustainability over the medium term. The IMF stands ready to provide technical assistance in this regard, including on pension reforms.
“Monetary tightening would be warranted if demand pressures emerge. However, existing monetary policy instruments are limited and need strengthening. The mission recommends redoubling efforts to develop a new monetary policy framework to dampen inflation volatility and encourages the authorities to progress faster in deepening debt and capital markets and in enhancing its public communication policy. The IMF will continue to provide technical assistance in this area.
“Recent government support has bolstered capital and liquidity at the International Bank of Azerbaijan, though a more comprehensive approach is needed. The mission encourages the authorities to downsize and privatize the bank in a prompt and transparent manner. A Joint IMF-World Bank Financial Stability Assessment Program update in the second half of 2012 will assess the financial system”.
“The mission thanks the authorities for the open and constructive discussions.”
1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities.