Baku, Azerbaijan, May 7
By Azad Hasanli - Trend:
The World Bank (WB) and the Government of Azerbaijan are discussing the revision of interest rates on loans under a project to strengthen competitiveness in agriculture, a source in the Government told Trend May 7.
The $53.2 million project has been implemented in Azerbaijan since 2013. One of its components (financial services to agribusiness) involves lending to entrepreneurs in the regions.
"The cost of loans is calculated using a special formula, which includes the discount rate of the Central Bank of Azerbaijan and a certain margin. After the monetary regulator raised the discount rate to 15 percent [in the fall of 2016], the cost of new loans increased, which made them less competitive," the source said.
As a result, according to the documents published by the World Bank, no loans were issued under this project in 2017.
However, the source reminded that this year the Central Bank reduced the discount rate from 15 to 13 percent, and then to 11 percent. Accordingly, if this formula is followed, the cost of loans should decrease.
The source added that the parties plan to revise not only the interest rate, but also to completely change the formula using which the cost of loans is calculated.
"Currently, the World Bank plans to restructure existing loans, and new loans will be issued under the new formula and at a new rate," the source told Trend.
The project for strengthening agricultural competitiveness aims to facilitate market access for agricultural producers by improving the quality of sanitary and phytosanitary services, providing financial services to agriculture enterprises, and so on. The project contributes to further development of agribusiness and food industry through the provision of loans to improve technology, increase production, and modernize phytosanitary and veterinary services. The project also contributes to improving the regulatory and institutional framework in the field of food safety and quality.
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