In the face of global economic instability and climatic challenges, Azerbaijan is demonstrating its financial stability and attractiveness for investors.
In an interview with the “Report” agency, Azerbaijani Finance Minister Samir Sharifov spoke about the country’s credit rating increase, cooperation with international financial institutions and planned international investments for the “green transformation” of the economy. On the eve of the largest climate conference of the year in Baku, we also discussed the work that needs to be done to combat climate change in the country.
Here is the interview in question:
– The main item on the agenda of the 29th session of the Conference of the Parties to the United Nations Framework Convention on Climate Change (COP29), which will be held in Azerbaijan in November this year, is the financial issue for the fight against climate change. Has an assessment been made of the financing needed for Azerbaijan to fight climate change?
– This is a global process. As a country that joined the Paris Agreement adopted at the XXI Conference of the Parties to the United Nations Framework Convention on Climate Change, Azerbaijan has undertaken certain obligations. These are primarily obligations for carbon emissions. In this regard, by order of the President of Azerbaijan Mr. Ilham Aliyev, the State Commission on Climate Change was formed under the chairmanship of the Deputy Prime Minister. Representatives of the Ministries of Ecology and Natural Resources, Agriculture, Economy, Foreign Affairs, Finance, Energy, Digital Development and Transport, Health, Emergency Situations and other state bodies were represented in the commission. In other words, it is this commission that coordinates the progress of these works in the country.
There are currently two main strategic approaches in place. One is related to mitigation, and the other is related to adaptation. To ensure these measures, appropriate funds and plans are needed. The diagnosis of these cases is currently underway. At the same time, over the past two years, the allocation of funds dedicated to climate issues has begun in the state budget with separate items.
– Is the Azerbaijani government considering increasing its foreign public debt? Are there any practical steps in this direction?
– As we know, an appropriate strategy for external public debt has been adopted in Azerbaijan. According to this document, Azerbaijan should adjust internal and external public debt to a certain proportion of the gross domestic product (GDP). Our external debt has decreased significantly. From this point of view, I think that our situation is quite satisfactory at the moment. However, it was decided that Azerbaijan can attract up to 5 billion US dollars from international financial institutions for financing medium-term projects. Needless to say, this is not an overnight job.
The process of preparing projects, their evaluation and other similar work with international financial institutions is currently underway. As a result of this activity, the signing of relevant agreements is expected. To strengthen the energy system, the preliminary projects are almost ready for signature. These projects will be financed by both the World Bank and the European Bank for Reconstruction and Development (EBRD). The implementation of these projects, in turn, will prevent the country’s energy network from being exposed to certain negative effects.
– In July this year, the international rating agency Fitch Ratings upgraded Azerbaijan’s credit rating to investment grade for the first time. Are you considering obtaining an investment grade rating from other rating agencies?
– We certainly want it and we have the right to it. This is because in recent years there have been radical positive changes in the Azerbaijani economy. On the one hand, Azerbaijan’s foreign exchange reserves are increasing, and on the other hand, debt obligations are decreasing. As a result, this leads to an increase in net financial assets. This is undoubtedly a very positive and reliable factor for every investor who wants to invest in Azerbaijani securities and debt.
Still, I think that rating agencies are quite sensitive to Azerbaijan. In a sense, they are showing greed. However, despite this, Fitch Ratings initially increased Azerbaijan’s long-term foreign currency issuer default rating by one step and raised it to the level of investment grade credit rating. I assume that Standard & Poors and Moody’s will take similar steps. Meanwhile, the change of the international rating agency “Moody’s” in the forecast of the highly unsecured foreign currency and issuer ratings of the Azerbaijani government from “stable” to “positive” gives us hope that this will happen sooner. That is, we are quite optimistic that these processes will find a fair solution.
– The Azerbaijani government is preparing national partnership strategies for the coming years with the World Bank and the Asian Development Bank. When are the new strategies expected to be approved?
– In principle, these strategies are policy documents of the banks. Thus, each interstate bank periodically adopts policy documents that define the programs implemented by its members. We are talking, of course, about partnership strategies between countries. As we know, the existing strategies are about to expire. In this regard, these institutions have already started working on developing strategies covering the new period with the Azerbaijani government. We assume that this process will be completed next year.
– The decision of the Board of Directors of the International Monetary Fund (IMF) to increase the quotas for member countries by 50% to $960 billion will come into force on November 15 this year. It is known that Azerbaijan’s quota in the IMF is 0.08% of the total quota volume, which gives the country 0.11% (5,376) of the total votes in the Fund. What will be Azerbaijan’s position on participation in the process of renewing its quotas in the IMF?
– Azerbaijan’s participation in the quota increase will be aimed at protecting the special weight we have among the Fund’s members. If there is any increase in this regard, we will participate in this process. Funds are allocated for this. Payments are made in separate installments over several years.
– State Oil Company of Azerbaijan (SOCAR) plans to acquire 51% of shares of OJSC “Azer-Turk Bank”. Considering that currently 75% of the bank’s shares are owned by the State Real Estate Service of the Ministry of Economy acting on behalf of the Azerbaijani government, while other shareholders include banks and companies from Turkey and Azerbaijan. SOCAR wants to implement this deal by acquiring the shares of which shareholders of the bank?
– According to the information I have, it is not a question of buying and selling. It is a question of transferring some of the state-owned shares of that bank to SOCAR. Today, there is no provision in the legislation that states that a state-owned company should buy any property of another state body.
