Officials from the International Monetary Fund and the World Bank will be in Azerbaijan today to discuss a possible $4bn emergency loan package in what risks becoming the first of a series of bailouts resulting from falling oil prices.
By Jack Farchy and Shawn Donnan
Officials from the International Monetary Fund and the World Bank will be in Azerbaijan today to discuss a possible $4bn emergency loan package in what risks becoming the first of a series of bailouts resulting from falling oil prices.
The mission to Baku, which follows a currency crisis triggered by the collapse in oil prices, comes amid concern at the IMF and World Bank over emerging market producers.
The fund and the bank have also been monitoring developments in other oil-producing countries such as Brazil, which is now mired in its worst recession in more than a century, and Ecuador. The oil-driven crisis in Venezuela has even raised the possibility of repaired relations between the fund and Caracas, which IMF staff last visited more than a decade ago.
Azerbaijan depends on oil and gas for 95 per cent of its exports and the fallout of its currency weakness has sparked a series of protests across the country, rattling the government of President Ilham Aliyev. Last week the former Soviet republic resorted to capital controls in response to the collapse in oil prices, imposing a 20 per cent tax on exporting foreign currency. The manat has fallen 35 per cent since the central bank in December abandoned a dollar peg after spending more than half its reserves in a year.
The IMF team would be in Baku from today until February 4 for “a fact-finding staff visit at the authorities’ request”, the IMF said. It would discuss possible “technical assistance” and “assess possible financing needs”. The financing package under discussion was worth about $4bn, people familiar with the discussions said.
The World Bank said that the IMF and it were discussing with the government immediate and longer-term measures “in response to the pressure on the local currency and low oil prices”.
The World Bank predicted this week that crude prices would average just $37 a barrel this year and warned of long- term consequences. It also cautioned that both producers and commodity markets faced the risk of a bigger than expected slowdown in major oil-consuming emerging economies like China.
“These are bad times for oil producers and their creditors,” Oxford Economics warned clients yesterday. “History provides reason for extreme pessimism on the likely fortunes of commodity producers; suggesting that [emerging markets] are prone to default and that commodity slumps are possibly the biggest cause of defaults.”
Christine Lagarde, IMF managing director, began the year in Nigeria where she warned that Africa’s largest economy faced “tough choices”.
Discussions with Baku are at an early stage and the government may yet opt to go without support from the IMF, people familiar with the matter said. While Azerbaijan’s central bank reserves have fallen dramatically in the past year, the country has little debt.
