BAKU, Azerbaijan, July 20. Azerbaijan has sufficient resources to maintain a stable exchange rate and has one of the highest levels of international reserves in the CIS, Deputy Head of Research, Chief CIS economist at Gazprombank Gulnara Khaidarshina told Trend.
“Based on the latest data on the State Oil Fund of Azerbaijan (SOFAZ) assets for 1Q2023, the country’s international reserves were estimated at $62.5 bln as of July 1, approaching 80% of GDP and covering 45.7 months of imports. Considering that the sales of foreign currency at auctions of the Central Bank of Azerbaijan (CBA) maintain stability, despite external risks, and are mainly determined by the schedule of budget expenditures, Gazprombank considers the dynamics of these sales to be neutral for the sovereign ratings and Eurobonds of Azerbaijan," she said.
Gulnara Khaidarshina noted that the volume of foreign currency sales at the auction amounted to $32.1 million on July 18, which corresponds to the level of the previous week. This figure was 39.6% lower than the average level of the fourth quarter of 2022, when budget expenditures reached a peak, and 10.1 times less than the maximum amount recorded in March 2020 ($323.2 million), at the beginning of the pandemic.
According to her, the volume of foreign currency sales at CBA auctions corresponds to the schedule of budget expenditures. Gazprombank assumes that the surge in foreign currency sales in mid-December was a one-time event and related to budget expenditures, which reached their peak this month.
"At the same time, taking into account the amendments, transfers to the state budget from SOFAZ are planned at the level of 11.7 billion Azerbaijani manat ($6.9 billion) in 2023. Usually, budget expenditures in the second and third quarters do not reach peak levels. Consequently, Gazprombank does not predict stabilization in the hydrocarbon market and does not expect a significant surge in foreign currency sales from the SOFAZ in the next two months," she said.
In general, $1.71 billion has been purchased at currency auctions since the beginning of the year. The maximum demand for the currency was recorded at the auction held on March 28, 2023, at $96.3 million.
According to the available data, the average demand at currency auctions organized by the CBA in 2022 was $52.4 million, while the supply was $70 million.
The CBA started conducting currency auctions in one-sided currency sales in competitive conditions in mid-January 2017.