The IMF mission welcomes the preparation of the bank restructuring plan and urges its prompt implementation.
The plan which should address the high level of nonperforming loans and lead to an increase of the capital of the weak banks, the report says.
Authorities have already taken measures to improve the health of the banking sector.
"The licenses of eight banks have been revoked, an asset quality review and a top-down stress test are being finalized, and an action plan is under preparation by the newly created supervision authority-in close coordination with the ministry of finance and the central bank-to restructure the remaining ailing banks", Trend cited the report as saying.
"Growth in 2016 is expected to rise to about 2.5 to 2.75% over the medium-term as gas production and exports rise and reforms start to take effect. Full implementation of a strong structural reform agenda could increase the economy's growth potential to around 4 to 5%", the report says.
The authorities have taken a number of steps in response to the weak external environment. "The Central Bank of Azerbaijan moved to a managed float exchange rate regime and appropriately raised interest rates in 2016 to address rising inflation" the report says.
Moreover, the policy coordination among ministries is being enhanced with the creation of an informal macroeconomic committee within the government.
