Bank deposits in Azerbaijan

Azerbaijan Deposits

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International Bank of Azerbaijan.
Fitch assigns an investment grade international credit rating of "BBB-" stable. This is the only State controlled bank, being a National Development Bank, with 50% share of all banking. Deposit 16% USD and 14% for EUR/ GBP

Frequently Asked Questions:

International Credit Rating

How strong is their economy?

Is it safe to invest there?

How can interest rates be so high?

What is the withholding tax on interest?

Is there a government deposit insurance scheme?

Map of Azerbaijan

Credit Rating
May 28, 2010 - The international credit rating agency Fitch Ratings has announced that they have upgraded Azerbaijan's sovereign credit ratings.

Fitch have upgraded Azerbaijan's long-term foreign and local currency Issuer Default Ratings (IDRs) to 'BBB-' from 'BB+'. The credit rating agency adds that the outlooks on both ratings are stable. Fitch has also upgraded Azerbaijan's Country Ceiling to 'BBB-' from 'BB+' and upgraded its short-term foreign currency IDR to 'F3' from 'B'.
In a press release from Fitch, the international credit rating agency states:
"Fitch believes the fiscal rule that limits the annual expenditure of oil revenues to a level consistent with the "permanent income" from the oil endowment is appropriate. The agency also draws comfort from the transparency of the SOFAZ [the State Oil Fund that leads on EITI], underlined by Azerbaijan being the first country to be fully compliant with the international Extractive Industries Transparency Initiative."
How strong is their economy?
One of the most successful hydrocarbon based economies.

Is it safe to invest in Azerbaijan?
The petrodollar inflow from their oil based economy justifies our highest recommendation. They are extremely abundant in oil and gas. The petrodollar inflow to its already large foreign reserves ensures foreign debt can be easily repaid. Even at $34 per barrel, Azerbaijan had a 5 % GDP growth rate in first half of 2010. Since independence, the Azerbaijan Manat (AZN) has steadily appreciated against the US Dollar.

Read my blog post on this issue.

How can interest rates be so high?

Since independence in 1992, like many other former CIS states, overdraft and loan rates have always been high, at 20% or more.Therefore banks can afford to offer deposits at 10% - 20% p.a. to finance these loans.

Azerbaijan Insurance Protection of Deposits

Azerbaijan has an Insurance Protection Scheme on Deposits. The purpose of the Deposit Insurance Scheme is to prevent the risk of losing money deposited by individuals and to ensure the sustainability and development of the financial and banking system whenever banks and local branch offices of foreign banks become insolvent. The Government guarantees reimbursement of principal and accrued interest up to 30,000 Manat (more than USD 37,000) for each deposit account in event of default by a bank.

Azerbaijan withholding taxes on deposit interest

Azerbaijani President Ilham Aliyev has issued an executive order on the enactment of the law “On the Exemption from Tax of Interest Incomes earned on Individual Deposits held by Banks and Other Institutions”.

Under the order, the Cabinet of Ministers is tasked to bring the existing legislative acts in line with the law within two months.

According the law, interest incomes earned on individual deposits held by banks and other institutions shall be exempted from tax for another three years from January 1, 2010.

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