The European Bank for Reconstruction and Development (EBRD) issued its first bonds in Azerbaijan’s national currency, raising AZN 50 million (€25 million) through the Baku Stock Exchange, according to a press release. The one-year floating rate bonds use Azerbaijan’s interbank rate index (AZIR) to calculate interest payments. ABB-İnvest Investment Company and Unicapital Investment Company managed the bond sale. The money will help fund EBRD’s local currency lending in Azerbaijan. This marks the first time the development bank has borrowed in Azerbaijani manats on the domestic market.
Azerbaijan has been working to develop its local capital markets and reduce dependence on foreign currency financing. The AZIR benchmark rate was set up by the Central Bank of Azerbaijan in May 2023 and updated this year with EBRD’s technical help. This rate tracks daily unsecured interbank lending and gives banks and the central bank a better tool for managing money markets. Similar benchmarks already exist in countries like the UK and US. The bond issue shows progress in building Azerbaijan’s domestic financial infrastructure.
EBRD worked with Azerbaijani authorities for several years to make this bond sale possible. The Central Bank of Azerbaijan backed the project, while the Baku Stock Exchange and National Depository Centre helped clear and settle the transactions. The bonds will be listed on the Baku Stock Exchange after getting approval. AZIR makes it easier to calculate interest payments on local currency financial products and helps Azerbaijan’s banking sector manage cash flow better. The benchmark also gives the central bank more data on how its monetary policy affects the market.
The successful bond sale shows EBRD’s commitment to developing local capital markets in countries where it operates. EBRD is Azerbaijan’s biggest institutional investor, having put over €3.6 billion into 200 projects covering renewable energy, transport links, and infrastructure. Local currency bonds help reduce exchange rate risks for both the bank and borrowers. The deal could encourage other international lenders to consider issuing manat bonds. This type of financing helps countries build stronger domestic financial systems while meeting their development needs.
