EBRD President Sir Suma Chakrabarti visited Azerbaijan on 24-25 May 2016, as part of a trip to three Caspian states – Turkmenistan, Azerbaijan and Kazakhstan.
The EBRD President met the President of Azerbaijan, Ilham Aliyev, and discussed EBRD-Azerbaijan cooperation, the government’s recent and planned reforms, the Bank’s support for the strategic cross-border energy project, the Southern Gas Corridor, and potential cooperation in the country’s banking sector, including what could be the first local currency bond to be issued by an international financial institution.
To date, the EBRD has invested a total of €2.5 billion in Azerbaijan. Over the last four years it has increased its investment in Azerbaijan’s private sector. Recent government reforms to improve the investment climate have given further momentum to the EBRD’s expanding and diversifying portfolio.
The EBRD President and his delegation also had discussions with the Minister of Economy, Shahin Mustafayev, and the Chairman of the recently created Financial Markets Supervision Authority (FMSA), Rufat Aslanli. Sir Suma also met with the Minister of Finance, Samir Sharifov.
The EBRD delegation included the EBRD Managing Director for Eastern Europe and the Caucasus, Francis Malige, and the Head of the EBRD Office in Azerbaijan, Neil McKain.
The EBRD team also met representatives from the banking sector and from civil society.
At a roundtable discussion with the chief executives of seven banks and financial institutions, the EBRD discussed challenges faced by the banking sector such as the low liquidity levels in the Azerbaijani manat, rising levels of non-performing loans and continued low levels of loan repayments.
Officials from the FMSA confirmed that regulatory steps had been taken that should allow the EBRD to issue a local currency bond, market conditions permitting.
During their meeting with Sir Suma, civil society representatives described good progress on a number of issues and also areas where in their view more needed to be done. Of particular note was the perceived progress in tackling petty corruption, thanks to the gradual implementation of the Azerbaijan Service and Assessment Network (ASAN) of citizen service centres.
Civil society representatives also referred positively to reforms in the customs system and simplification of the licensing and permits system and a reduction in the frequency of company inspections. President Chakrabarti and civil society representatives agreed that accelerating the work required to restore the country’s full membership of the Extractive Industries Transparency Initiative (EITI) was a priority, an objective shared by the Government of Azerbaijan.
During the visit, Sir Suma spoke at the Azerbaijan Diplomatic Academy and gave a press briefing to Azerbaijani and international media.
Summing up his meetings, Sir Suma said: “It was a very successful visit. I was able to discuss a variety of important subjects with the President, the government and the civil society representatives. In the meetings, I noted that the recent drop in oil prices presented an opportunity for the diversification of the Azerbaijani economy by growing the non-oil and gas private sector. This is a development that the EBRD strongly supports. I also stressed that for long-term private sector growth, in particular for small and medium-sized enterprises, it is crucial to have a vibrant and viable financial sector. The financial sector is currently facing a combination of short-term issues such as low liquidity in the local currency and rising levels of non-performing loans combined with structural issues of fragmentation, asset quality and governance. The EBRD is prepared to work with all stakeholders to find solutions. With regard to oil and gas, we will aim to make strategic investments which will guarantee the country’s long-term economic health. In that context we will support the Southern Gas Corridor, a project which diversifies export routes for Azerbaijan and is also important for energy security in Europe.”
The EBRD President added that the Bank is considering supporting the two pipelines that form part of the Southern Gas Corridor, the Trans-Adriatic Pipeline (TAP) where the EBRD is considering providing a syndicated loan of up to €1.5 billion, and is also in the early stages of considering co-financing the Trans-Anatolian Pipeline (TANAP).
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