Gazprombank: ‘Azerbaijan is one of the countries with the highest international reserves in the CIS’

“Azerbaijan is one of the countries with the highest international reserves in the CIS,” Gulnara Khaidarshina, deputy head of research, chief CIS economist at Russia’s Gazprombank, said after the meeting held at the Azerbaijan State Oil Fund (SOF), Report informs.

According to her, Azerbaijan's external liquidity position is strengthening faster than expected: “According to the results of the first quarter of 2023, the country's strategic currency reserves are estimated at $62.6 billion. This figure is nearly 80% of GDP and is enough to finance 46.9 months of imports.”

Due to the high prices of hydrocarbon resources, the assets of SOFAZ increased by 18% in the first quarter compared to the corresponding period of 2022 and amounted to $53.4 billion. This is a historical record, although the Oil Fund has to transfer $6.6 billion to the state budget this year.

Khaidarshina believes that 2 factors contributed to the significant increase in the assets of the State Oil Fund against the backlash of increasing external risks: the fact that the prices of energy resources remained at an attractive level contributed to the increase of funds of SOFAZ against the background of the recovery of demand in Asia (the average price of Brent oil in the first quarter was $82 per barrel, 1.6 times more than the price of oil specified in the state budget); against the background of continued balance in the foreign exchange market, sales of SOFAZ in weekly auctions decreased by 42.8% in the annual indicator.

“Despite external crisis factors, the Oil Fund adheres to a conservative approach to managing international reserves. Oil and natural gas revenues are transferred to SOFAZ. About 50% of it is transferred to the budget, and 50% is kept in a sovereign fund.”

According to her, the State Oil Fund is a supporter of a conservative approach in the formation of an investment portfolio consisting mainly of debt instruments (it was 61% at the end of the first quarter). SOFAZ also invests in shares (21.1%), gold (12.1%), and real estate (5.7%). In order to minimize currency risks, the State Oil Fund not only uses various instruments but also manages its funds according to currency limits. About 70% of SOFAZ's investments are in US dollars, 20% in euros, 5% in pounds, and about 5% in other currencies.