BAKU, July 15, 2025 — Since April 2025, Azerbaijan’s Ministry of Finance has been placing substantial portions of the state budget into systemically important local banks in the form of low-interest deposits.
In just one auction held on July 11, the ministry deposited 850 million manats at an average interest rate of 7.25%.
When the program first began, many economic experts predicted that the injection of cheap state funds into banks would lead to a drop in lending interest rates. But is that what really happened?
Economist Khalid Karimli says the expected decline in loan rates hasn’t materialized. According to him, the short-term nature of these government deposits is one of the main reasons why banks haven’t passed on the lower funding costs to borrowers.
Still, banks are paying less to attract capital. According to the Central Bank of Azerbaijan, the average rate at which banks raised new funds fell from 8.3% at the start of 2025 to 6.9% in June — a 1.4 percentage point decrease.
However, this drop has yet to significantly impact consumer or business loan rates, raising questions about the effectiveness of the ministry’s strategy in stimulating affordable credit.
