Central Bank of Azerbaijan targets liquidity and credit tightening

The Central Bank of Azerbaijan (CBA) is implementing measures to encourage banks to direct their free funds toward lending and to tighten regulations on non-bank credit organizations (NBCOs).

CBA Governor Taleh Kazimov announced that the bank expects to purchase approximately $1 billion in foreign currency during the final two months of the year. While the bank does not have a specific target for foreign exchange reserves, purchases are made based on market conditions and the potential inflationary impact of manat issuance. So far this year, the CBA has purchased $3.6 billion in foreign currency.

To stimulate the interbank money market, the CBA reduced the interest rate paid to banks for attracting funds to 5% in September. This move aims to make interbank operations more attractive than holding funds at the Central Bank.

Regarding non-bank credit organizations, Kazimov signaled upcoming tightening of regulations for high-interest, short-term daily lending. The regulator intends to gradually lower the ceiling on the maximum income these organizations can earn from interest, commissions, and fees to prevent excessive household debt. Kazimov noted that the regulator is not interested in the expansion of this type of lending and expects a decrease in its prevalence.