IMF: Azerbaijan banks remain profitable despite slower lending

Although lending growth in Azerbaijan slowed significantly in 2025, the countrychr("39")s banking sector remains well capitalized and profitable, the International Monetary Fund (IMF) mission chief to Azerbaijan Anna Bordon said in a statement following her visit to Baku from February 4 to 17, 2026, where she assessed recent macroeconomic and financial sector developments, Olaylar informs.

Based on IMF estimates, net domestic lending expanded by 29.7 percent in 2025 compared to the previous year, but overall credit growth is expected to decelerate from 11.2 percent in 2026 to 9.7 percent by 2032, reflecting a gradual normalization in financial conditions.

Unlike total lending, credit to the private sector is projected to follow a more predictable path, with growth forecast at 8.9 percent in 2026 and stabilizing at around 9 percent annually between 2027 and 2031, indicating steady demand from businesses and households.

"In light of the slowdown in lending growth, maintaining the current parameters of the countercyclical capital buffer would be appropriate, while the introduction of the liquidity coverage ratio and the planned implementation of the net stable funding ratio would further strengthen the resilience of the banking system," Bordon noted.

She added that the recent adoption of risk-based supervision by the Central Bank of Azerbaijan would reinforce prudential oversight, and that the phased implementation of the Basel III standards, along with ongoing improvements to the financial safety net framework, would enhance financial stability and boost public confidence in the banking sector.