Chairman of the Central Bank of Azerbaijan Taleh Kazimov said that “there are several implications of the geopolitical tensions for the financial system of Azerbaijan.”

Speaking at the panel discussion “Resilience of the Financial System in Emerging Markets” in Riyadh, Taleh Kazimov presented three implications, Trend reports.

“The first and the most important part is global inflation and its impact on inflation in Azerbaijan. The second is the changes in international settlement architecture. And the third is the regulatory landscape,” he noted.

Kyazimov recalled that in October 2022, the inflation rate in Azerbaijan peaked at 15.6%.

“By the end of 2024, we managed to hold it back to 4.9%. Our forecast shows that, given the uncertainties, inflation will be 5.5% this year and next year it will be at the range of 3.8%. So, generally, we are within the target of the Central Bank.

We are importing inflation. The average annual inflation rate of our trade partners over the last three years amounted to 15.8%. Using our anchor stable currency regime as a target, we have managed to hold back the inflation. The appreciation of the nominal effective exchange rate annually was 13%, which gave us a significant advantage in holding back the importing inflation,” the chairman of the Central Bank said.

Speaking about the second key trend, he emphasized the changes in the international settlement landscape.

“Given the unprecedented number of sanctions, particularly against our neighboring state, we saw that the architecture of international settlement started to change. We have seen an increase in local payment settlements. Previously, the US dollar dominated - about 90% of our foreign trade is conducted in dollars. However, now we see an increase in the use of digital assets, particularly cryptocurrencies, which pushed us to speed up bringing the digital assets’ regulation,” the Azerbaijani Central Bank chairman said.

The third aspect, he said, is the regulatory landscape, where Azerbaijan has made significant progress over the past three years, particularly in AML and compliance.

“We are trying to keep the balance between economic activity and international requirements in the field of compliance and AML,” Kazimov concluded.