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For many years now missions of the International Monetary Fund have been coming to Azerbaijan to conduct a review of economic reforms and to express their opinion about them, but no longer in the form of demands on the government in exchange for loan facilities, as was the case a few years ago, but simply recommendations. It will be recalled that in the period of cooperation as a whole (since 1992) Azerbaijan has taken out IMF loans of $577.3m for the implementation of six different cooperation programmes whilst carrying out economic reforms. The country is currently continuing to pay off this debt, and by 1 January this year only $15.3m remained unpaid.

Having abandoned borrowing from the fund back in 2006, the country, naturally, did not stop cooperating with this leading world organization, and now this inter-action is being conducted within the framework of consultations on article IV of the fund's charter and technical missions on the main areas of macroeconomic policy. It is significant that there have been far more positive things in the IMF's findings on Azerbaijan of late than there were during the period of "credit cooperation".

According to Raja Almarzogi, the head of the fund's mission for Azerbaijan, it is thanks to the use of oil revenues for the development of the economy that in the past ten years the country has been transformed into one of the countries with the most rapidly developing economy in the world. Moreover, at a press conference on the results of the mission, Almarzogi said that this year the increase in the non-oil GDP, based on the high level of state expenditure, will be 9%, which will give a boost to increase the volume of the gross product as a whole by 4.5%.

At the same time, however, the high level of state expenditure will lead to an acceleration in the rate of inflation. "For 2013 the IMF forecasts average annual inflation in Azerbaijan at a level of 3.4% and inflation for January-December is projected at 7%," he noted. The government itself forecasts a growth in GDP for 2013 of 5.3%, including 11.7% in the non-oil sector, and average annual inflation is projected at 5.7%.

It is inflation risks that have inspired the IMF to recommend that Azerbaijan gradually reduces the volume of its state expenditure, thereby creating room for private investment. And this should be accompanied by measures to further improve the business environment.  "Positive examples of such measures are the launching of the ASAN service, the creation of an electronic government, the adoption of a new Customs Code and a readiness to adopt a code on competition," Almarzogi said. The IMF also bases its position on the fact that because of the gradual reduction in the level of oil extraction in Azerbaijan during the development of plans for the development of the economy up to 2020, the country should lean towards turning the private non-oil sector into a locomotive of the economy. "As a result the Azerbaijani economy will be more stable and diversified and the volume of exports of non-oil output will increase," the IMF expert noted, adding that if the plans to preserve a strong budget are to be implemented in the future, then this will increase Azerbaijan's dependence on oil and also cause concern over the effectiveness of the state budget. "The reduction in state expenditure, the eschewal of a budget adjustment in the middle of the year and the prevention of tax evasions will allow the private sector to develop by its own resources and also help gradually eradicate the negative aspects of the fiscal sphere," Almarzogi said.

In addition, the IMF is recommending that the Azerbaijani government tightens its monetary policy. Generally speaking, the fund's experts support the actions of the Central Bank of Azerbaijan which are aimed at increasing the minimum demands on the capital of the banks. "We believe that these actions will help to increase competition in the banking sector and also improve the business models that are being applied in banks in Azerbaijan." Almarzogi said. It will be recalled that in August 2012 the Central Bank endorsed a programme to increase the minimum demands of banks for their own capital - in accordance with this by 1 January 2014 it should be not less than AZN 50 million.

Thus, the current recommendations of the IMF are not substantially different from the findings of previous missions and, as has already been said, on the whole the positive tone of the opinions expressed is important from the point of view of confirming Azerbaijan's image as a country with the leading economy in the region.