Baku: Officials from the International Monetary Fund arrived in Azerbaijan for talks on providing possible financial aid to the government as the former Soviet Union’s third-largest oil exporter reels from the effects of a currency crisis triggered by the collapse in crude prices.

The IMF team held a closed-door meeting with the Azeri Finance Ministry in the capital, Baku, on Thursday, a ministry official said by phone, asking not to be named as she isn’t authorised to speak to the media.

The “fact-finding staff visit” was requested by the Azeri government to “discuss areas for technical assistance and assess possible financing needs,” the IMF said in an emailed statement Wednesday.

Azerbaijan seeks to borrow $3 billion from the IMF and $1 billion from the World Bank, whose officials are also in Baku for discussions, the Interfax news service reported on Thursday, citing a person it didn’t identify. The Financial Times reported earlier that the IMF and the World Bank are discussing a possible $4 billion emergency loan package for Azerbaijan.

The Azeri central bank moved to a free float on December 21 after burning through more than 60 per cent of its reserves last year to defend the national currency, the manat, as crude prices tumbled. The currency, which had fallen only once in the previous 12 years, nosedived by 32 per cent and has slumped to record lows this month, stirring public unrest over rising prices for food and other essential goods.

The manat traded at 1.615 per dollar at 10:45am in Baku, down 1.2 per cent and the weakest on record.

Currency controls

Azerbaijan imposed some restrictions on the movement of capital last week, including a 20 per cent tax on foreign currency exported for investment abroad, and announced plans to insure all retail deposits. Central bank Governor Elman Rustamov said that five to seven banks may be merged to consolidate the industry, and six lenders were closed this week for failing to comply with minimum capital requirements.

President Ilham Aliyev told his government last week to look into opportunities to borrow more abroad, saying that Azerbaijan’s foreign debt was “very low” at 12 per cent of gross domestic product last year. He also called for the preparation of a “comprehensive” privatisation program to draw in foreign and domestic investors.

The Finance Ministry announced plans this week to sell $500 million in sovereign bonds on the domestic market to cover a budget deficit this year. The ministry will also sell 400 million manat of debt in an effort to restore trust in the national currency.