IMF: "The ongoing global financial turmoil has so far had limited impact on Azerbaijan's financial sector"

The ongoing global financial turmoil has so far had limited impact on Azerbaijan's financial sector, but a credit slowdown may be forthcoming, said in the Aide M?moire of the IMF mission by results of the visit to Baku, according to Interfax-Azerbaijan.

Notably, the IMF mission led by Valeria Fikera was in Baku on December 10-17.

An undeveloped financial market, the rather low dependency of domestic banks on "hot" capital inflows, and a very strong international reserve position helped to shield Azerbaijan from the early impact of the crisis. In addition, the Azerbaijan National Bank (ANB) responded quickly and appropriately to the situation", said on the website of the fund.

The document notes that as a result, banking soundness indicators at end September showed that Azerbaijan's banks entered this period of turmoil and uncertainty in a relatively solid position, and standard stress testing results pointed to the system's good resilience to shocks.

"However, after a few years of rapid credit expansion, banks portfolios are likely to be particularly sensitive to a now expected slowdown in economic growth and the quality of loans is likely to deteriorate, reducing banks' earning potential and their capacity to extend new credit.

IMF considers that the economy maintained a very strong growth performance over the first 10 months of 2008.

Growth in the oil sector is estimated at 10 percent, notwithstanding some slowdown since August, due to external events and technical disruptions to offshore production.

Non-oil activity responded strongly to the exceptional fiscal stimulus and growth accelerated to about 15 percent, led by a robust expansion in construction, services and agriculture".

Experts consider that booming oil exports and prices up to August, and the contractual shift in the profit-sharing ratio of the oil consortium in favor of the government in 2008, have all contributed to a major strengthening in the external position and to the accumulation of substantial foreign assets.

At end-September, Azerbaijan's gross official reserves and state oil fund assets jointly reached $16 billion, six times the size of public external debt.

Azerbaijan joined IMF on September 18 of 1992, while the quote of the country in the fund is SDR 160.9 mln ($248 mln). Currently Azerbaijan receives only technical assistance of the fund without the IMF credit resources.

As of October 1, Azerbaijan's debt to the fund made $81.9 mln. In 2008-2012 Azerbaijan will pay to the fund in the framework of earlier received credits of SDR 55.96 mln ($88.9 mln).