EBRD to be even more active in Azerbaijan in 2023

Finance Interview 30 December 2022 09:15
Baku, Azerbaijan Trend News Agency Leman Zeynalova
EBRD to be even more active in Azerbaijan in 2023

The European Bank for Reconstruction and Development (EBRD) is set to maintain its key strategic priorities for Azerbaijan in 2023, Kamola Makhmudova, head of EBRD in Azerbaijan, said in an exclusive interview with Trend.

“This means continued focus on developing the country’s non-oil sector, strengthening of local lenders, as well as boosting investment in green economy and regional connectivity,” she explained.

Makhmudova pointed out that the Bank will be even more active in 2023, financing both, private and public sectors.

“Projects currently in the pipeline include sustainable infrastructure, agribusiness, financial institutions, and green energy, among others. At this stage, however, we cannot comment on precise figures, as some of these projects are still a work in progress,” she added.

Investments as of 2022

With one more deal to be signed by year end, the investment of the European Bank for Reconstruction and Development (EBRD) in Azerbaijan this year will exceed 90 million euros, said Kamola Makhmudova.

She noted that approximately half of this investment went to private sector.

“The breakdown is as follows: 25 percent each for sustainable infrastructure sector, and technology media and telecommunications (TMT sector), the remaining for agribusiness, manufacturing & services and financial institutions,” Makhmudova explained.

Cooperation in green energy

Makhmudova noted that The European Bank for Reconstruction and Development Bank eyes expanding green investments into new cities in Azerbaijan.

“EBRD Green Cities is a flagship programme that has gained tremendous popularity in recent years. At present, more than 50 cities have joined this unique programme to address their infrastructure and environmental challenges in a sustainable and resilient manner. As you know, Ganja is the first and, so far, the only city in Azerbaijan to join EBRD Green Cities, and this year we signed two projects there.

These projects will help the city address shortcomings in solid waste collection and street lighting infrastructure,” she added.
Makhmudova noted that EBRD launched the preparation of the Green City Action Plan for Ganja city, which is expected to be ready next year.

“The action plan will contain a comprehensive list of infrastructure investments and policy measures to address the most acute problems that Ganja residents are facing. In parallel, we are in touch with the Ministry of Economy of Azerbaijan to expand the Bank’s green and low-carbon investments into new cities and infrastructure sectors. Together with the Ministry, we are reviewing a couple of new projects in Ganja city and in other parts of Azerbaijan. We will publish more information about these projects once preparation progresses,” she explained.

Hydrogen potential

Makhmudova pointed out that EBRD is preparing a market study report on Low Carbon Hydrogen Economy in Azerbaijan.

“The market study report on Low Carbon Hydrogen Economy in Azerbaijan is currently being prepared and we are expecting that this report will be finalised in the upcoming months,” she said.

Makhmudova noted that as part of the cooperation between EBRD and Azerbaijani authorities on hydrogen, EBRD is supporting the Azerbaijani authorities with the review and the assessment of the potential of hydrogen production in Azerbaijan.

Prospects for EBRD’s participation in projects in Karabakh

Makhmudova noted that EBRD is keen to explore new infrastructure projects that meet eligibility criteria in terms of Bank’s policies and standards.

"These criteria encompass a large spectrum of questions, starting from environmental, sustainability aspects to procurement and financial considerations. The list is extensive and each project requires extensive assessment. Therefore, upon receipt of such request by the government, we will evaluate such opportunities on a project-by-project basis, in coordination with other IFIs (international financial institutions) and subject to safe access to project sites (as we understand that de-mining of the territories is still ongoing)," Makhmudova explained.

Partnership with more banks

She noted that There are number of banks in Azerbaijan that the European Bank for Reconstruction and Development currently considers for cooperation in 2023, and subject to the positive developments in the financial metrics of these local banks, EBRD will be able to offer new loans to Azerbaijani banks in the near future.

“We are currently looking at expanding our partner banks on Trade Finance and MSME lending (SME Competitiveness / Green and Women in Business – subject to the appetite from the local banks),” she noted.

Makhmudova pointed out that EBRD, in line with the Azerbaijan Country Strategy for 2019-2024, aims to strengthen the resilience of the local Financial Institutions by Developing Financial Markets.
“This stipulates sustainable funding structure and sound risk management practices of banking sector. In order to meet these objectives, EBRD is actively engaged in discussions with the Central Bank of Azerbaijan to improve the conditions in Financial Markets for IFI Bond issuance, Green bonds and derivatives / securitization.

Besides these, EBRD has implemented two Technical Assistance programs in Azerbaijan, namely Azerbaijan Agriculture Financing Facility and PFI (Participating Financial Institutions) Capacity Building Program in 2018-2022. One of the programs – PFI Capacity Building Program – run over the course of 2019-2022 and assisted local banks in identifying the gaps in their internal practices, while developed respective action plans to allow local banks in closing these gaps,” she said.