The manat is quite stable, we don’t expect any pressure on it - Intervıew with World Bank’s representative

15:33 - 16.03.2022

WB Manager for Azerbaijan Sarah Michael gave an interview for ABC.AZ.

The WB representative spoke about projects in Azerbaijan, the situation of banks in the country and the impact on the exchange rate of the manat. We present this interview to the attention of readers.

- Are new WB projects related to Azerbaijan expected in the near future, if so, which ones?

- We’re currently implementing three projects in Azerbaijan. The first of them is the Employment Support Project. The main goal of this project is to provide people, in particular those ones belonging to socially vulnerable groups, with certain employment skills, and then equip them with tools and equipment to start their activities. Our second project relates to the modernization of the justice sector. Here, the project also aims to digitalize the justice system, introduce electronic courts and ensure simplified access of citizens to justice services. And currently up to 1 million people have access to these new services.  Our third project is comparatively new and was launched at the end of last year. The project includes the reconstruction of the Salyan-Bilasuvar road, the road between the mentioned districts. This project also envisages improvement of a new transport link. This will be taken into account both in aspects related to infrastructure improvement and in aspects related to road safety, as well as changes in the road reconstruction process. More importantly, this project will also contribute to the development of business, capital, and certain business activities of people in these regions.

- For how long is the construction of the road in question planned?

- The WB allocated $65 million for the construction of this road. A number of procedures have been carried out for the implementation of the project. With the start of the construction season, construction work is likely to begin in the near future. Most likely, the construction will be carried out within 2 or 3 years.

- As a whole, does the WB conduct monitoring after allocating finances for projects? And have you encountered any negative situations during monitoring?

- Of course, we allocate financing. But we believe financing is not the main part of our work. And, of course, we are actively involved in both the preparation and implementation of these projects. This is done in various ways. First of all, I’d like to note that the fact that the WB has global experience and global knowledge gives special value to the WB. We can apply the experience gained on a global scale to countries. From this angle, we, together with the relevant governmental agencies, strictly control the implementation of projects. With this purpose, we conduct special monitoring and execution support missions several times a year.
Together with government experts, we analyze the progress of the project and give our advice. Certain adaptation of the project is needed in the process of its implementatiom. For example, over the past 2 years, because of the pandemic, it has become necessary to make some adjustments to the structure of certain works and projects. For instance, the trainings of the persons who will participate in them are part of the employment project. As a rule, these trainings are held "live", but due to the pandemic, it became necessary to conduct these trainings in an online form. The rating of evaluation of projects in Azerbaijan is calculated and given. I am proud to say that each project as a whole received satisfactory assessment. There were no serious shortcomings. But of course, there are little things that are eliminated.

- The WB has been operating steadily in Azerbaijan for a long time. Are there any plans to expand the bank or further increase its profile in Azerbaijan?

- I’d like to note that in any country where we conduct our activities, we work precisely on the basis of the government's request. The beginning of the development of any project, its initiation is the result of joint work with the government. And, of course, over these years, certain changes may occur in the areas of our activities. For example, when we started the partnership 30 years ago, very few talked about digital development. But now this topic is at the center of our discussions. By the end of this year, together with Azerbaijan, we’ll prepare a document with official Baku that will determine the spheres of activity for the next 5 years. I’m sure that if we meet again at the end of this year, we’ll be able to say more precisely and in detail what we’ll do in Azerbaijan in the next 5 years. This year we are celebrating the 30th anniversary of our partnership with Azerbaijan. And we can say that over these 30 years we’ve supported projects in all spheres of the country's life. This support covers all areas - from healthcare, education to agriculture, including the financial and energy sectors. And we’re looking to the future. At that, according to Government’s new proposal, we’re ready to continue our partnership in any direction that is deemed appropriate.

- Can this be understood as the fact that in the coming years the WB will not reduce, but expand its partnership with Azerbaijan?

- Of course, in any case, we do not intend to reduce our presence in the country.

- How do you assess the current state of banks in Azerbaijan and are they given any recommendations?

- After the crisis of 2015 and 2016, we’re witnessing the improvement and strengthening of the banking system. This manifested itself in several ways.
We’re witnessing the process of liquidation of weak and vulnerable banks, improvement of asset quality in the banking system, as well as de-dollarization of deposits. We’re also witnessing the Government's commitment to the recovery of the financial sector in the past years. In particular, this is manifested in the improvement of the system of control over the financial sector. At that, regulatory and control structures are being improved. Attention to ensuring the stability of the banking system has increased. At that, of course, there are certain areas requiring attention or elimination of difficulties. There are certain banks that have currency risks and obligations. At the same time, in the global market outside the banking system, volatility is one of the issues that demands certain attention.

- Which country's banking sector do you consider the most progressive among the countries of the South Caucasus?

- Compared to other middle-income countries, Azerbaijan's banking sector is comparatively small. If you look at the ratio of loans or deposits to GDP, then compared to countries with the same income, the banking sector in Azerbaijan is smaller than in the aforementioned countries. That is, there is certain potential in this area. At that, we’re holding discussions in the field of financial inclusion. And in this area for several years, especially during the pandemic, we’ve witnessed the Government's commitment to this. This suggests that the scale of people's use of digital services is expanding. The peculiarities of each country, the peculiarities of their economy are different. Accordingly, the priorities of their financial sector and banking system also differ. In each country where we work, we certainly carry out assessments on several indicators, give assistance to countries. This still includes the stability of the banking system, financial inclusion, access to loans from financing, asset quality, the regulatory phase, the level of competition in the market and the introduction of digital technologies. In accordance with the banking sector of each country, one of them is given more attention, while the others fade into the background.

- It is known that there are currently 26 banks operating in Azerbaijan. Do you think this is enough or not enough for the country with the 10 million population?

- If we talk about banks, their number is not so important. The volume of loans and deposits raised by banks is important. In terms of the depth of the system and its coverage, Azerbaijan lags somewhat behind countries with their own level of income.

- Food is becoming more expensive, the manat is weakening. Have any measures been taken by the Government in such a situation?

- Firstly, all over the world today we’re seeing an increase in food prices and an increase in inflation. Our economists working all over the world are trying to analyze these trends. The manat is quite stable, given the high oil and gas prices, we do not assume any pressure on its exchange. Of course, we’re working closely with the Central Bank, and if support is needed in any area, we’re ready to make recommendations.

By Elmir Murad