Foreign exchange sales by the State Oil Fund of the Republic of Azerbaijan (SOFAZ) slowed further in June to $278 million, 11 percent lower than year ago, amidst weaker demand for foreign currency, Report informs, citing the World Bank’s Azerbaijan Monthly Economic Update – July 2022.
According to the bank, this allowed the Central Bank of Azerbaijan (CBA) to build up reserves in June (with a 2 percent increase compared to May) and cover 6.2 months of imports.
“The trade surplus continued to increase as export growth outpaced a pick-up in imports. Exports more than doubled in May compared to a year ago, largely driven by energy exports, which expanded substantially both in terms of volume and prices. In May, the export price of natural gas climbed to $816.6, the highest on record. Non-energy sector exports increased by 10 percent (YoY). In contrast, imports expanded by 26.7 percent in May, in line with strengthening domestic demand, bringing cumulative import growth for the first five months of the year to 17 percent. The trade surplus rose to 34.4 percent of GDP during January-May, double that of the same period of 2021,” reads the Economic Update.
The bank also noted that remittances continued to surge in May, rising by 3.6 times (YoY), mainly due to inflows from Russia.
The WB economists also underlined the amendments to the state budget for 2022 that were approved on June 29, allowing a boost in budget spending.
“Revenues are projected to increase by 8.8 in nominal terms percent compared to the previous budget. This increase reflects higher projected non-energy tax receipts due to expected stronger activity and higher taxes from oil companies as the benchmark oil price for the budget is raised to $85 per barrel (from $50 under the previous assumption). Against the backdrop of higher revenue collection, transfers to SOFAZ are budgeted to be cut by 9.4 percent. Meanwhile, budget spending has been revised up by 8.1 percent. Over half of the spending increase will be directed to public investment for reconstruction while the rest will be spent on defense, social protection, and food security measures. The revised budget deficit is estimated at 2.7 percent of GDP in 2022,” reads the Economic Update.