Azerbaijan’s Central Bank to decrease interest rate

By Azernews

By Rasana Gasimova

The Board of the Central Bank of Azerbaijan (CBA) has decided to reduce the interest rate by 0.25 percentage points from 7.5 to 7.25 percent, Chairman of the CBA Elman Rustamov said on January 31.

Addressing the press-conference on the change in the discount rate, Rustamov said that the lower threshold of the interest rate corridor was reduced from 5.75 to 5.5 percent, while the upper threshold - from 9.25 percent to 9 percent. This is the first reduction in the interest rate by the Central Bank in 2020. It entered into force on January 31.

He added that since the recent meeting of the CBA's board on monetary policy, inflation rate did not go beyond the forecasted trajectory and remained below the average value of the target range.

A surplus current account balance, a stable exchange rate, adequate monetary conditions and low inflation expectations had a stabilizing effect on the prices, he noted.

Rustamov went on saying that the risks for the medium term are mainly associated with external factors, particularly, with a slowdown in the global economy and the impact of this factor on oil prices, adding that internal risk factors include an increase in the money supply as a result of growth in budget expenditures and inflationary expansion of consumer loans.

He went on talking about Azerbaijan's strategic currency reserves, noting that they exceeded $52 billion in late January. “The country's strategic currency reserves grew by about a little more than $1 billion or two percent compared to early 2019,” Rustamov said.

He emphasized that the Azerbaijan's economy is ready to reduce the risks associated with the threat of coronavirus.

“The government has carried out serious work in confronting external challenges. Thus, Azerbaijan's budget is calculated based on oil prices at the level of $55 per barrel, which is a fairly rational approach that minimizes external risks and practically guarantees an annual surplus due to price differences,” Rustamov said.

He also said that the activities of the Azerbaijan Mortgage and Credit Guarantee Fund (MCGF) must be commercialized.

"Banks do not have long-term resources. Their ability to provide mortgages should be enhanced. It is necessary to work towards raising funds from the domestic market and preparing projects to increase the volume of mortgage loans," he said.