Moody's: If oil prices $45-65 p/b, size of SOFAZ assets to keep growing

Moody's: If oil prices $45-65 p/b, size of SOFAZ assets to keep growing
  • Clock-gray 18:26
  • calendar-gray 06 April 2021

Enhancements to exchange rate management and the communication of monetary policy by the Central Bank of Azerbaijan (CBAR) are likely to foster stability in Azerbaijan's external and foreign exchange market dynamics, APA-Economics reports citing Moody's.

Besides the predictable supply of US dollars through regular auctions of transfers by the State Oil Fund of Azerbaijan (SOFAZ) into the government's budget, CBAR has the ability to step up the frequency of the auctions to meet temporary increases in the demand for dollars.

In monetary policy communication, regular publication of and increased transparency in monetary policy priorities, decisions and meetings also help manage inflation and risk sentiment.

Assets held by SOFAZ, which are foreign currency denominated and invested in liquid markets, continued growing in 2020 despite the pandemic, and are large enough to cover nearly 480% of the government's direct debt. Based on Moody's oil price assumptions of $45-65 per barrel over the medium term, the size of SOFAZ assets is likely to keep growing over the next few years, absent a sharp increase in transfers to the government.

Mirsaid İbrahimzade

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