Press Release: IMF Staff Statement on the Delay in the Completion of the Fourth Review of Azerbaijan Republic's PRGF Arrangement

April 1, 2004

The International Monetary Fund's Resident Representative office in Baku issued today the following statement on behalf of the IMF staff mission:

"The mission had visited Baku in late February for discussions on the fourth review of the Azerbaijan Republic's performance under a three-year, SDR 80.45 million (about US$119 million) Poverty Reduction and Growth Facility (PRGF) arrangement. Consideration of the review by the IMF Executive Board had tentatively been planned for early May 2004. The mission had welcomed the continued strong economic growth and maintenance of prudent macroeconomic policies.

"However, substantial differences remain between the IMF staff and the government on a number of issues, including on the procedures for implementing the recently adopted Banking System Law. The IMF staff is also concerned about slow implementation of policies that have previously been agreed upon; these include the privatization of the International Bank of Azerbaijan, the adoption of a long-term oil revenue management strategy, the design and implementation date of an oil product price adjustment mechanism, the adoption of the revenue and expenditure plans for 2004 of state-owned enterprises, and the submission of the draft National Bank Law to Parliament. The staff fears that, if not resolved, these policy problems could have adverse consequences for future economic growth and poverty reduction.

"The staff is awaiting proposals from the government on ways to bridge these policy differences and to accelerate reforms. It is hoped that these issues can be resolved so that the staff can be in a position to recommend completion of the fourth review of the PRGF arrangement.

"The Poverty Reduction and Growth Facility is the IMF's concessional facility for low-income countries. PRGF-supported programs are based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners, and articulated in a Poverty Reduction Strategy Paper (PRSP). This is intended to ensure that each PRGF-supported program is consistent with a comprehensive framework for macroeconomic, structural, and social policies, to foster growth and reduce poverty. PRGF loans carry an annual interest rate of 0.5 percent, and are repayable over 10 years with a 5½-year grace period on principal payments."


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