OREANDA-NEWS. February 20, 2014. The Management Board of the Central Bank held an extended meeting dedicated to the results of 2013. The meeting, attended by heads of CBA structural units and regional offices, was opened by Mr Elman Rustamov, CBA Governor.

E.Rustamov highlighted the issues mentioned by President Ilham Aliyev on macroeconomic stability and sustainable socio-economic development of the country at the meeting of the Cabinet of Ministers of the Republic of Azerbaijan dedicated to socio-economic results of 2013 and tasks ahead for 2014 and told that amid the overall ten-year modernization strategy and the successful socio-economic policy the country fashioned high economic growth dynamics, which rapidly transformed to inclusive development, social welfare and high living standards aided by sustainable macroeconomic stability. Our country has advanced 100 rankings in terms of per capita GDP and entered the middle income countries group within a short time horizon. According to the World Economic Forum, Azerbaijan is one of the 7 countries with the lowest inflation. One of the significant events of the previous year was that Azerbaijan is ranking among 40 competitive countries.

While major leading world countries are fighting the crisis, Azerbaijan is implementing sustainable growth oriented strategic objectives. The country is on top 10 in terms of macroeconomic sustainability indicators. The national economy is highly employed. Hundreds of thousands of new jobs have been created and regions have accelerated their socio-economic development.

In 2013 the country further strengthened its foreign economic position; according to rough estimations, the scale of export surpassed USD 30 billion, while surplus of the balance of payments exceeded USD 10 billion. The national economy owns foreign exchange reserves, capable to face any shocks. Strategic FX reserves surpassed USD 50 billion, the size of which equals to 70% of GDP. The country economy posted 5.8% growth the previous year. The non-oil economy rose 10%.

The Central Bank actively contributed to this grand building and development strategy, utilized monetary policy’s stabilizing and promoting capacity adequate to the economic cycle, and directed its policy to macroeconomic and financial stability, the prerequisite of balanced growth. As a result, inflation was low, the exchange rate remained stable and the banking system sustained in 2013. Financial intermediation expanded and diversified. In 2013 average annual inflation was below average CBA target range, i.e. 2.4%.

To support diversification of the economy, the CBA actively assisted in successful implementation of the government’s economic policy, promoting financial intermediation of the banking sector and development of financial infrastructure. To regulate banking sector risks and overheating, the Bank applied flexible financial stability management tools, which resulted in considerable drops in average interest rates on newly issued loans to the economy.

E.Rustamov referred to President Ilham Aliyev’s speech at the conference dedicated to the implementation of the State Program on Socio-economic Development of Regions of the Republic of Azerbaijan and told that, indeed, the Azerbaijani banking sector posted rapid growth in recent years. Today we have a strong banking sector. In general, access of the country economy, particularly regions to credit resources and financial services has broadened on a sound basis.

The CBA continued efforts to develop the payment infrastructure. The state of the art payment infrastructure allows large-scale cashless and e-settlements. Payment systems post stable and improved operation, the size of e-payments surpassed GDP two times as much.

The CBA FX reserves reached USD 14.2 billion over the reporting period having climbed 21%. Owing to huge surplus of the balance of payments, the CBA sterilized about USD 2.5 billion worth currency to avoid considerable strengthening of the exchange rate and neutralize negative impacts on the non-oil sector competitiveness, as supply prevailed over demand in the FX market. Consequently, over the period the exchange rate of manat against USD remained stable.

The Bank formulated a new strategy to expand reserves’ currency, tool and geographic diversification, with an eye to efficiently manage CBA FX reserves, on the backdrop of gradual changes in economic power centers on a global scale, as well as lingering low profitability in developed financial markets.

The CBA has been implementing about 40 various institutional growth oriented projects within the strategic plan frame. The Bank spared no efforts to modernize all directions of the Bank’s activity. The Bank institutionally grew, development of human resources was on the focus, implemented projects targeted efficient implementation of functional and business processes.

E.Rustamov overall positively appreciated results of 2013. He mentioned key objectives of the CBA for 2014. The CBA – as a public institution, which actively contributes to sustained economic growth in the country – will take an active part in realization of socio-economic growth targets, assigned by Mr President, and render critical support for the diversified economy, as well as rapid growth of the non-oil economy in the Year of Industry in 2014. Given the fact that single digit low inflation is an acceptable target of the macroeconomic policy, the CBA will render critical assistance to meet government’s inflation expectations via the monetary policy. To that end, the Bank will affect core inflation utilizing its regulatory tools.

The CBA will continue efforts to realize terms for application of the monetary policy regime, which enables more flexible management of inflation. Gradual introduction of these terms in the medium run will expand the options for a more flexible exchange rate regime.

In general, the CBA will strive to effectively balance the monetary policy between economic growth and price stability, and regulate financial sector’s overheating. However, the inflation rate will be the key target. The monetary and macro prudential policies will be synchronized in line with the recent trends. The CBA will continue activities to maintain the banking system stability and develop risk based banking supervision in the year to come, and focus on deeper financial sector and broader access to the sector. E.Rustamov mentioned that we should accordingly attain more extensive involvement of the banking sector in financing of the real sector in harmony with the recent call by Mister President.

Upscaling of cashless payments and development of the mortgage mechanism will be the vital priorities of the CBA performance. Public institutions will be interfaced to the Government Payment Portal on an ongoing basis. Regions will be promoted to increase access to banking services, innovative payment tools massively used, efforts will continue to stimulate high volume of cashless and e-settlements. The Bank will commence to formulate the legislative base for e-payment services.

At the end of his speech E.Rustamov emphasized efficient use of all resources to successfully finalize projects on the existing Strategic Plan, as well as setting key priorities for the new strategic period. To realize the targets ahead the CBA will further modernize and develop human capital, the research and analytic base and management processes.