15:50 - 9.07.2024
July 9, Fineko/abc.az. Reducing the dependence of the Azerbaijani economy on the US dollar has lowered the exposure of foreign exchange markets to significant volatility, which in turn has reduced the vulnerability of loans to external risks.
ABC.AZ informs that this is stated in the report of international rating agency Moody's in connection with the confirmation of Azerbaijan's sovereign rating at Ba1 with positive outlook.
Meanwhile, dollarization in the financial system continues to decline as prudential measures against banks' currency risks become tougher.
"At that, improvement of the quality of regulation of the financial sector by the Central Bank of Azerbaijan contributes to increasing the stability of the banking sector, reducing the risks of contingent liabilities for the government. Asset quality in the banking sector has continued to improve in recent years, despite various shocks, while high reserves provide significant shock absorption capacity. Banks' capital and liquidity positions also remained stable, and we expect them to strengthen further as the Basel III standards are gradually implemented," the report says.
Moody's believes that, compared with previous shocks, the CBA's measures to tighten monetary policy in the period 2022-2023 were the most effective, since more frequent rate hikes with less intensity allowed to contain inflationary pressures.
"Increased efficiency and confidence in monetary policy reflect reforms that increase transparency in decision-making, as well as greater proactivity in monitoring and managing macroprudential risks. Recent and ongoing efforts to improve the transmission of monetary policy through the introduction of a new operating structure at the end of 2022 indicate a commitment to reform, which should further enhance policy effectiveness and pave the way for a transition to an inflation targeting regime in the long term," the report says.
