“The shift to a new economic model, one based more on non-oil private sector growth, will require a fuller liberalization of goods, labor, and product markets, properly functioning financial markets, and greater efforts to improve governance,” he said.

El Qorchi added that the assessment would be that a number of positive economic reforms have been undertaken in Azerbaijan, but more needs to be done.

“I will just focus on two areas,” he said. “For example, the devaluations improved competitiveness while the new managed float regime provided some much needed exchange rate flexibility. Greater flexibility, however, would allow the exchange rate to more fully absorb shocks and help to reduce dollarization pressures.”

El Qorchi said that critically, a cleanup of the banking system and restructuring of International Bank of Azerbaijan (IBA) is underway.

“New macro prudential policies to reduce risky dollar based lending have been implemented,” he added. “New financial supervisory institutions such as the Financial Market Services Agency (FMSA) and the Financial Stability Board have been established.”

“These are all encouraging steps,” El Qorchi said. “However, it appears that IBA will remain a relatively large bank, and that its privatization will take some time. Also, there are number of financial system vulnerabilities that still need to be addressed, particularly regarding emergency lending assistance and a proper bank resolution authority.”

IMF`s office has operated in Baku since 1992. In 1995-2005, IMF allocated loans worth $577.3 million to Azerbaijan for supporting the country`s economic reform program. Azerbaijan has fully repaid the loans.

Azerbaijan has seen no need for the IMF financial resources since 2005. So, the sides have been cooperating within the consultations and technical assistance on key areas of macroeconomic policy since 2006.

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