PremiumReview of monetary sector in Azerbaijan (january 2013)

The Central Bank has formed a new strategy to govern its foreign exchange reserves in 2013. This strategy involves diversification of financial instruments in the reserves and geographical structure in terms of the current global economic situation.

All bank accounts used for interbank settlements in Azerbaijan, have been transferred to international bank account number (IBAN) since Jan. 7, 2013. This step is taken to improve the identification of bank customers in the area of electronic payments, to increase the level of automation and to eliminate fragmentation in the structure of bank settlements.

Currency market and manat rate

The Azerbaijani Central Bank (CBA) intends to support stability of the national currency rate in 2013. CBA controls the national currency rate to avoid excessive exchange rate of manat as to reduce and to increase the rate. A rate is maintained at a stable level through additional injections into the foreign exchange market of the country. The rates of annual change in the Azerbaijani national currency to the U.S. dollar did not exceed one percent for the last 15 years.

In 2012, the manat rate compared to the U.S. dollar strengthened by 0.19 percent, in January 2013 - by 0.04 percent to 0.7844 manat per $1 as of January 31.

In Jan. 2013, the euro exchange rate compared to the manat increased by 4.06 percent as opposed to dollar. It should be stressed that the high volatility of the dynamics was characterized for EUR / AZN exchange rate.

Foreign exchange market

In Jan. 2013, the total volume of currency section of the Baku Interbank Currency Exchange (BBVB) reached 42.651 million manat or 54.366 million in U.S dollars. The total volume of trading in currency decreased by 33 percent compared to December 2012 and by 34 percent compared to Jan. 2012.

The average daily turnover in stock exchange electronic trading system on USD / AZN in January reached about $2.861 million, while the average amount of each transaction was $2.471 million.

The turnover on EUR / AZN in the reporting period amounted to 523,600 manat. The average rate of the euro compared to manat made 1.0472 manat.

Around 8 banks participated in the currency trades. Around 38 trading sessions were conducted and 22 transactions were registered in "Bourse E-System of Trades" (BEST) during this month.

The exchange rate of national currency on tool USD/AZN_TOD in accounting month increased by 0.3% from 0,7856 to 0,7834 for $1. Thus the US dollar average rate in consideration to manat made in Jan. 2013 - 0,7845 AZN for $1 compared to 0.7846 manat as of Dec. 2012.

As of Jan. 2013, the total amount of trades at Organized Interbank Credit Market functioning within the limits of system BEST made 5 million manat.

The average monthly rate expected on the basis of bids of market-makers banks on the credits of BakIBOR within 90 days in Jan. 2013 made 11,39% annual in manats and 12,36 annual in U.S dollars. A rate of BakIBID on manat deposits within 90 days made 5,54% annual and 5,3% in US dollars.

Mortgage market

Loans amounting to 1.7 million Manat, or by 17.9 percent less than the funds directed for mortgage crediting were delivered through the Azerbaijan Mortgage Fund (AMF) under the Central Bank of the country in Jan. 2013, the AMF said today.

Mortgage loans worth more than 421.89 million manat were delivered in 2006-2012 through AMF (74.77 million manat - in 2012, 95.64 million manat - in 2011, 97.08 million manat - in 2010, 76.9 million manat - in 2009, 70.2 million manat - in 2007, 5.6 million manat - in 2006).

As of January 2013, the total amount of loan refinancing delivered by the banks earlier hit 2.68 million manat (42.86 percent less than the same period in 2012). AMF placed bonds at the amount of 8 million manat during the first month compared to 23 million manat in January last year.

Around 72% of the total volume of given loans (41% of borrowers aged 18-29, 31% - 30-35 years old) fell to young people and families. Around 28% of the loans fell to borrowers over 36 years old.

Currently the maximum amount of a common mortgage loan through the AMF is 50,000 Manat at a rate of 8% with a payback period of 25 years. Terms under the social mortgage it is 35,000 Manat at an annual rate of 4% with a payback period of 30 years. The initial payment under the social mortgage is 15%, whilst the conventional loan is 20%.
Around 40 million manat were envisaged in the state budget 2013 to finance social mortgage, but the funds have not been transferred from this amount to the fund.

Conditions of mortgage lending are as follows; loans must be issued in Azerbaijani Manats and only to Azerbaijani citizens and the mortgage can only be for an apartment or private house. The volume of mortgage lending must not exceed 80% of the market price and the monthly payment must not exceed 70% of the debtor's monthly income. It is compulsory to take out an agreement on life insurance.

Preferential conditions are granted to family members of war victims, national heroes, internally displaced persons, civil servants with at least a three years' experience, PhDs, those making special contributions to sport as well as to the military with at least a three-year service term. Each family having the right to such a mortgage can only use the opportunity once.

There are 27 authorized banks belonging to the Mortgage Fund, 21 insurance companies and 11 appraisal organizations, all are participants of the mortgage market.

Stock market

The total turnover of transactions on all instruments on Baku Stock Exchange (BSE) in Jan. 2013 totaled 146.45 million manat, or by 84.42 percent less compared to the same period of 2012.

Such a decrease in stock market in the country was caused by decreasing the state securities market by 85.93 percent, while the corporate securities market by 30.54 percent.

The state securities market decreased up to 128.65 million manat in Jan., the volume of corporate securities market hit 17.8 million manat in Jan.

Comparative table on the results of trades on corporate sector at BSE (January 2013)

Comparative table on the results of trades on state sector at BSE (January 2013)

Abbreviations:
- GB - government bonds,
- GS - government securities,
- CB - corporate bonds,