Finance Desk

Taleh Kazimov, governor of the Central Bank of the Republic of Azerbaijan, discusses the central bank’s drive to modernize the banking system and how it supports economic diversification.

Global Finance: How well armored is Azerbaijan’s monetary framework against today’s global risks?

Taleh Kazimov: Azerbaijan is an open, small economy; in 2025, trade turnover reached 79.8% of GDP. Energy prices work through three channels that do not point the same way. Directly, a U.S.$10 rise in the oil price adds roughly U.S.$1.2 billion to the current account, and a U.S.$50 rise per thousand cubic meters of gas, about US$900 million.

The second channel runs the opposite way; around 80% of our non-energy imports come from energy-importing economies, so a 10% oil-price increase raises trading-partner inflation by roughly 0.67%. Here, the nominal effective exchange rate absorbs much of the pressure. The third channel runs through the valuation of strategic assets. Netting the three, the overall effect remains clearly positive.

The framework rests on three pillars.

Exchange rate stability is the key nominal anchor; where trade is the dominant transmission channel, a stable nominal rate neutralizes much imported inflation and expectations stay anchored within our corridor of 4%, plus or minus 2 percentage points. Second, an interest rate corridor with standing facilities ensures policy decisions transmit predictably. Third is the buffer stock; strategic reserves rose U.S.$700 million this year to U.S.$85.8 billion at end-June, exceeding 125% of GDP and covering close to 400% of broad money.

GF: What are your priorities for modernizing the framework?

Kazimov: The objective is unchanged: price stability. Our baseline projects inflation at 6.1% at end-2026 and 5.8% at end-2027: both inside the band, with upside risks on the supply side. The priority is not a change of objective but strengthening and deepening interest rate transmission while preserving exchange rate stability as the primary anchor, with interbank rates as the auxiliary anchor for domestic inflation.

Since September 2022, we have built an active interbank money market from the ground up. AZIR, the overnight unsecured benchmark, has been our secondary operational target for over a year, with the average spread to the policy rate now about four basis points. Last year, the European Bank for Reconstruction and Development issued floating-rate notes referenced directly to AZIR, which is a stronger endorsement.

We have three priorities: strengthening passthrough to market rates; deepening capital and money markets by expanding instruments referenced to AZIR, including the yield curve; and upgrading forecasting through data analytics and AI. I would add a fourth, easily overlooked: communication. Credibility remains a central bank’s most valuable asset.

GF: How would you evaluate the success of the Financial Sector Development Strategy 2024-2026, the central bank’s modernization plan?

Kazimov: We designed the strategy around measurable priorities across every major segment and committed to publishing annual progress reports. That matters as much as the targets, because a strategy whose execution is not measured externally converges on whatever is easiest to accomplish. The execution rate reached 81.8% in 2024 and 85.6% in 2025.

Behind those achievements lies substantive change: reforms aimed at improving transmission through the interest-rate channel, strengthening the stability of the financial sector, modernizing payment infrastructure, fostering digital financial innovations, and introducing a green taxonomy.

GF: Economic diversification away from the energy sector remains a national priority. How is it proceeding?

Kazimov: The six-month data illustrate the composition. The non-oil share remains solid at around 70%. Construction contracted 13% while transport and logistics expanded 8%, information and communication 7.5%, and non-oil industry 4.1%. This is precisely the reallocation we want: activity moving into tradable sectors that earn foreign exchange. During the first six months of the current year, investment in the non-oil sector increased by 5.5%, primarily driven by a 20.8% increase in private-sector investment, which offset a 3.8% decline in public investment.

Monetary policy can support but not deliver diversification. What we can do is provide the conditions: stable prices, a stable exchange rate, a sound banking system, and a market capable of transforming long-term savings into productive investment. Structural reforms on the 2027–2030 economic agenda will determine the pace [of diversification]. Our contribution is to ensure macroeconomic and financial stability.

European CFOs face mounting economic uncertainty, shifting priorities toward cost discipline and resilience.

A Deloitte CFO survey conducted in April showed that 48% of respondents are less optimistic about their companies’ prospects than they were six months earlier. Their pessimism in autumn 2025 was limited to 25%.

Economic uncertainties explain that state of mind: 76% of respondents put energy shocks, inflation, the conflict in the Middle East, and disruption of the supply chain at the top of their risk list.

“CFOs across Europe are entering the second half of 2026 with a noticeably more cautious outlook,” said Richard Muschamp, Deloitte EMEA CFO program leader, attributing their pessimism to “a more challenging operating environment.” EY’s CEO Outlook found similar concerns, with 60% of these respondents citing geopolitical tensions as a near-term risk.

“The real question is, What are you doing about it?” said Myles Corson, EY global finance leader. “CFOs need to build resilience into their organization.” In the short term, that means localizing the supply chain, with a focus on energy security and energy pricing. “Leaders are increasingly prioritizing resilience, productivity and cost discipline over expansion and risk-taking” he said.

According to the Deloitte survey, only 26% of CFOs expect to increase capital expenditures over the next 12 months, and 36% anticipate workforce reduction. Consumer goods sectors, impacted by the slowdown of demand, are at the forefront of the workforce adjustment. Unilever PLC declared a hiring freeze that would last at least three months. In Germany, luxury car maker Porsche AG announced one in five job cuts by 2035, and Deutsche Lufthansa AG said it will eliminate 4,000 white-collar roles by 2030.

In France, executives at the industrial engineering firm Fives Group see no immediate need to downsize. Defense and aeronautic clients, warehouses in need of automatization, industries looking for decarbonization, keep Fives busy. Still “10% of our activities have been impacted,” said Suresh Abye, the finance director. “We are very vigilant about our costs structure. In that sector we stopped recruiting and transferred some employees to different activities.”

Fives has clients in a dozen countries, including France, Germany, Italy, China, Japan, and America. “Compared to America and Asia, Europe is the most impacted by inflation, unemployment, and tepid demand,” added Abye. “The regulatory framework is too laborious and there is no policy favoring local producers.”

Nevertheless, Europe also has a few tricks up its sleeve. Corson highlighted the “quality of its talent pool, the diversity of the market, and its focus on sustainability.”

To take full advantage of these strengths, the EY finance leader suggested maintaining investments in artificial intelligence. “Companies will be able to identify where opportunities are, they will adjust quicker and be able to repurpose their people” said Corson, an eager advocate of cost optimization.

Caroline Crosdale is a contributing writer to Global Finance.  

Investments in instant and cross-border payment systems fuel adoption.

From the start of August to the end of September, the National Bank of Rwanda saw transactions on its eKash instant digital payment system jump from 140,000 to 1 million per month.

The value of transactions also rose sharply, from about $7 million per month to around $1.5 billion per month.

The Rwandan government considered payments a public good and invested in eKash as part of the digital public infrastructure, provided that the new platform ensured a level playing field between mobile money operators and banks, said Soraya Munyana Hakuziyaremye, the Governor of the National Bank of Rwanda, during a Governor Talk at the IMF and World Bank annual meetings in Bangkok. 

eKash Takes Flight

The central bank, taking a page from leading operators of instant payment systems like India’s UPI and Brazil’s PIX, decided to eliminate existing bilateral relationships that mobile money providers had with banks and microfinance institutions and mandated that all person-to-person transactions take place on eKash. It also capped transaction fees at a hundredth of what users might have previously paid.

“For transactions that were above a million [Rwandan] francs [about $679], you could pay up to the equivalent of a $2 fee for a transaction,” Hakuziyaremye said. “Today, the transfer fee is capped at 20 francs, or less than $0.02.”

Without the mandatory routing requirement, she added, the central bank could not have reduced transaction costs. 

To soften the blow the mandate had on the bottom lines of the affected banks, mobile money providers, and microfinance operators, the central bank showed them possible new revenue streams from offerings that leveraged the transaction data collected by eKash.

“They can negotiate with our national switch for the data they need at an aggregated level to offer more lending to their clients, since they have the history of their transactions, and use alternative credit scoring instead of asking for collateral for every single loan they give,” said Hakuziyaremye.

Access to credit remains a major concern for the National Bank of Rwanda, or NBR, as 92% of people have bank or mobile money accounts, but only 20% have access to credit or microcredit. 

“It is still a very huge gap,” she said. “So, tracking the financial health indicators will help us improve the financial well-being of citizens.”

Cross-Border Integration

The East African country is also experiencing rapid advancements in cross-border payment integration at the regional and continental levels.

The NRB is seeing the East African Payment Master Plan, adopted by the East Africa Community, or EAC, in 2025, begin to bear fruit. The central bank launched a pilot that integrates eKash with its eastern neighbor’s Tanzania Instant Payment System, or TIPS.

“We want to use this as a blueprint for a framework to integrate payment systems in the region,” said Hakuziyaremye.

At the same time, the country is part of the Common Market of Eastern and Southern Africa (COMESA), which has its own regional payment system, the COMESA Clearing House.

The NRB is actively integrating its payment systems with the African Continental Free Trade Area’s Pan-African Payment and Settlement System (PAPSS), which seeks to deliver instant payments to beneficiaries in their local currency anywhere in Africa.

When faced with regional cross-border instant payment transactions, NRB agreed to route all of its intra-EAC payments through the regional EAC payment system and to route transactions outside the EAC through PAPSS.

“I believe that this is the approach to take,” she said. “It’s not duplicating the regional payment system, but allows cross-regional payments for regions that already had regional payment systems.”

Rob Daly covers fintech and the economy. Contact him at rdaly@gfmag.com.

Supply-chain diversification fuels a growing Southeast Asian financial ecosystem.

This article appears in the October issue of Global Finance Magazine.

China Plus One (C+1) is a supply-chain-focused strategy in which companies retain substantial manufacturing and sourcing in China while adding at least one other country. The C+1 strategy is rapidly shifting manufacturing to countries in the Association of Southeast Asian Nations (ASEAN), boosting foreign direct investment (FDI), expanding trade surpluses, and driving GDP growth.

At the same time, the Regional Comprehensive Economic Partnership (RCEP)—a free trade agreement among 10 ASEAN member countries plus Australia, China, Japan, New Zealand, and the Republic of Korea—is boosting intraregional trade and the cross-border use of local currencies, thereby germinating a potentially formidable Southeast Asian financial ecosystem.

China’s unmatched supplier density, scale, and infrastructure are retained, but concentration risk is mitigated by building capacity in ASEAN (or elsewhere). If a manufacturing site or supplier faces a tariff hike, lockdown, or political shock, production can shift rather than halt. Even without these factors, costs are substantially reduced.

A clear example of C+1 in action is Taiwan’s Foxconn, which operates factories in Bac Ninh Province in northern Vietnam, where its plant assembles Apple’s AirPods and MacBooks using high-value parts manufactured in China.

The industrial base remains in China, with ASEAN serving as a tariff and resilience hedge. Vietnam has benefited from a cumulative $5 billion in Foxconn’s FDI in the country from 2007-2026—according to Taiwan Stock Exchange and Bac Ninh local government data—to create manufacturing capacity and more than 100,000 jobs in Vietnam.

The FDI story exemplified by Foxconn has been echoed across ASEAN. “Since 2021, FDI in the region has been exceptionally strong, with annual inflows exceeding $200 billion, compared with an annual average during the last decade of less than $130 billion,” according to the ASEAN Investment Report 2025, published last October by the ASEAN Secretariat and the UN Conference for Trade and Development (UNCTAD).

That report tallies 2024 inflows at $226 billion. Underlining the ASEAN dynamic in relative global terms, FDI was up by 8.5% that year while global FDI fell 11%.

“The strategic importance of ASEAN in global supply chains has strengthened significantly over the past decade, catalyzed by the China Plus One strategy, which aims to mitigate risks arising from geopolitical tensions and search for more-resilient production networks,” said Han Teng Chua and Radhika Rao, senior economists at DBS. 

“The region’s open and foreign-investor-friendly policies, coupled with companies’ efforts to expand markets, diversify risks, and optimize costs, could drive ASEAN-6’s FDI inflows to grow at a robust CAGR of 7% over the next decade.” ASEAN-6 is a bloc comprising Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam.

Funding the Trade Finance Gap

Alongside the FDI narrative sit two burning issues: the pressing need to finance ASEAN trade, which is characterized by an “unmet gap” between demand and trade finance; and the underpinning of the region’s economies by micro, small, and midsize enterprises (MSMEs) and SMEs.

A joint assessment by the U.K. Growth Gateway and Boston Consulting Group, dated February 2024, puts the ASEAN-specific unmet gap at roughly $350 billion to $400 billion and estimates that closing even 10%-20% of that gap could unlock $85 billion to $105 billion in “trade value uplift” and about 6 million jobs in the region’s trade-related industries.

But a big reason for the region’s unmet gap is the preponderance of SMEs and MSMEs. According to the ASEAN Secretariat, these account for 97.2% to 99.9% of all business establishments. Collectively, SMEs and MSMEs generate about 85% of employment, contribute 44.8% of GDP, and supply 18% of national exports, making them central to job creation, inclusive growth, and value-added activity across both urban and rural areas.

The sobering fact is that about 40% of these companies’ trade-finance applications are rejected, according to the Asian Development Bank (ADB), often because applicants lack sufficient collateral, complete documentation, or an established credit history.

This is compounded by ASEAN’s fragmented nature and the urgent need to fully digitize trade and trade finance in a region that still relies on paper documentation. The Model Law on Electronic Transferable Records (MLETR) is the solution: a legal template that ASEAN countries can incorporate into law so that a digital original of trade documents has the same legal status as a paper original.

Singapore implemented MLETR in 2021, and the hope is that ASEAN’s Digital Economy Framework Agreement will push the rest of the region to align with it.

“Carbon copies still choke ASEAN trade—slow ships, costly credit, shut-out SMEs. MLETR is the legal unlock. Singapore is live. Mass uptake isn’t guaranteed, but the shift would be seismic,” said Alicia Garcia-Herrero, chief economist for Asia Pacific at Natixis, in Hong Kong.

Singapore’s move came in preparation for the RCEP, which came into force in 2022 for the first 10 ratifying countries. The 15 RCEP member countries represent the world’s largest trade bloc by population and economic size—about 30% of global population and GDP.

The RCEP aims to cut tariffs on more than 90% of goods traded among its members by 2042 and also covers services, investment, e-commerce, and intellectual property. Intra-RCEP trade rose sharply in 2022 to around $1 trillion and stood at around $6 trillion last year. The agreement has positively impacted trade for Cambodia, Laos, Myanmar, and Vietnam with other RCEP partners—exports from Cambodia to RCEP countries account for more than 60% of the country’s total trade.

Rebuilding ASEAN’s Trade Plumbing

Digitalized supply-chain finance—anchored in distributed-ledger technology—and local-currency settlement can rebuild ASEAN’s trade plumbing around firms, not just banks. Anchor buyers channel liquidity to SME and MSME suppliers, bypassing the need for collateral and thereby helping to fill the unmet gap.

The ADB’s Trade and Supply Chain Finance Program (TSCFP) helps close the unmet gap in SME trade finance by issuing AAA-rated guarantees and loans through more than 250 partner banks, enabling smaller firms in developing Asia to import, export, and access supply-chain working capital that private lenders would otherwise typically withhold.

In August, Steven Beck, TSCFP director, relocated to Singapore, in a move that reflects the city-state’s preeminence as an ASEAN supply-chain and trade-finance hub. “Being here means we can work much more closely in this energized ecosystem, feeding off the energy and exchanging ideas in a way you just can’t do remotely,” he said.

“It’s been a remarkable year,” Beck added. “Our business is up over 60% compared to the same period last year, which is a huge jump for a program that already supports about 20,000 transactions worth over $5 billion annually. Part of that is just persistent, unmet demand for trade finance in markets that have historically been underserved.”

Settling invoices through ASEAN’s Local Currency Transaction Framework alleviates dollar scarcity that bedevils the trade arena in smaller ASEAN economies and reduces foreign exchange spreads and correspondent-bank delays that hinder SME and MSME exporters. Linked digital platforms—e-invoicing, QR-code payment networks, and regional payment connectivity—convert those flows into reusable credit data. The result is a tighter, cheaper intra-ASEAN financial ecosystem in which trade transactions themselves become the collateral.

Jonathan Rogers is a contributing writer based in Vietnam.

As ships bypass the Red Sea, increased traffic around the Cape of Good Hope could benefit African economies.

The ongoing conflict with Iran in the Strait of Hormuz and attacks by the Houthis, a Yemen-based militant group, in the Bab el-Mandeb Strait have forced many shipping companies to explore alternative routes around Africa. While the financial and operational costs are significant, the shift presents new economic opportunities for African countries, particularly those positioned to serve the growing volume of maritime traffic.

The main detour causes international shippers to bypass the Red Sea and the Suez Canal corridor, traveling around the southern tip of Africa past the Cape of Good Hope. This longer route can add up to two weeks to a trip from Europe to Asia, increasing energy and shipping costs.

The Cape of Good Hope was already one of the world’s busiest sea routes before recent developments, driven by the conflict with Iran that began in February 2026. According to the U.S. Energy Information Administration (EIA) World Oil Transit Chokepoint Report, released in March 2026, approximately 9 million barrels per day of crude oil and petroleum products pass around the Cape of Good Hope, accounting for 11% of global seaborne oil trade.

Despite the additional shipping time and cost, many major container operators still chose to divert mid-voyage from the original Suez Canal route because of ongoing threats and blockades, as the Houthi forces continue to advance along the Red Sea coast and target regional maritime traffic.

New Shipping Opportunities for Africa

The increase in traffic around Africa, and more specifically around the Cape of Good Hope, provides various African countries with new economic and diplomatic opportunities. The main economic benefits stem from the expenses and services associated with the new shipping routes. 

First, the Institute for Strategic Studies Africa 2026 Report highlights that most vessels do not call at South African ports. These ports can offer international shippers key high-value services, including ship repair and maintenance, crew changes, resupply, and medical support. While major South African and Namibian ports, such as Durban and Walvis Bay, can provide a full range of services and logistics connectivity for this new traffic pattern, other countries, such as Kenya and Mauritius, can also connect this traffic to the Indian Ocean shipping needs.

Second, global pressure to replace shipping fuel with more sustainable, environmentally friendly alternatives is creating strong renewable energy markets and green hydrogen potential in African nations, along with an opportunity to capitalize on this shift. A recent report by the European Council on Foreign Relations shows that countries such as Morocco and Kenya can serve as major marine refueling hubs. As trade and investment in renewable energy have become a diplomatic currency in Africa, the ability to influence shippers’ emissions can strengthen diplomatic relations among relevant nations.

Finally, as almost 70% of the previous Red Sea freight has been rerouted around South Africa, according to the Center for Security and International Studies, African nations like Djibouti are becoming key players in the new maritime security space. These nations can offer foreign nations improved physical and technological maritime security and use it to advance negotiated diplomatic and commercial goals.

IMF and World Bank’s annual meeting explores economic resilience amid climate risk, debt pressure, and AI.

While walking around central Bangkok, it’s easy to miss the damage that prompted IMF and World Bank officials at their annual meeting to consider postponing this week’s event. 

No evidence of the extreme flooding elsewhere in the city, which caused so much damage and loss of life just a week ago, is visible. Life goes on—scooters buzz and trucks barrel down the expressways and narrow streets where vendors hawk exotic foods and trinkets. Bangkok officials did an admirable job cleaning up to prepare for the arrival of some 15,000 attendees, and the area surrounding the convention center is as dry—and secure—as it’s probably ever been. 

Inside the meetings, though, the question was how much more disruption—climate-related or otherwise—the global economy can absorb, and who can afford to recover when the next shock arrives.

At Tuesday’s World Economic Outlook briefing, IMF Chief Economist Silvana Tenreyro described a world economy being pulled in two directions. Conflict in the Middle East has pushed energy prices higher, while investment in artificial intelligence has helped drive growth. The IMF outlook projects global growth of 3.1% this year, but that headline figure masks sharp differences among countries. Energy exporters and countries driving the AI boom are better positioned, she said, than those that must import fuel or have little stake in the massive technology surge.

“The economy has been resilient, but that resilience is reaching its limits,” Tenreyro said at the briefing.

The economy is holding up, in part, because countries and companies have navigated disruptions by rerouting supplies, drawing down inventories, improving efficiency, and finding alternatives. Without those adjustments, the IMF estimates global growth would be closer to 2.5%.

But these measures have limits. Inventories run down. Efficiency gains can only go so far. And another shock—whether geopolitical or climate-related—could arrive before economies have recovered from the last one.

G-24’s Climate and Debt Dilemmas