No significant spike expected in Azerbaijan’s FX sales over next month, Chief CIS Economist says

Assuming stabilization on the hydrocarbons market, we do not expect a significant spike in FX sales by SOFAZ over the next month, Gulnara Khaidarshina, Deputy Head of Research at Russia's Gazprombank and Chief CIS Economist, said, Report informs.

“Additionally, Azerbaijan’s budget will be supported by the current upward reversal of the trend on the hydrocarbons market,” she said.

According to a press release published on Tuesday by the Central Bank of Azerbaijan (CBAR), the volume of FX sold at the auction held on August 29 totaled $58.9 million. The volume of FX sold at yesterday’s auction remained virtually unchanged compared with the previous week (-1.7% WoW) and was close to the seasonal norm. Moreover, Tuesday’s sales were 5.5 times below the highest figure since the onset of the pandemic, recorded in March 2020 ($323.2 million).

The Chief CIS Economist said that the volume of FX sales at CBAR auctions remains in line with the schedule of budget expenditures: “To remind, the latter tend to grow in the second half of the year. Given this year’s amendments, transfers to the state budget from SOFAZ are slated at 11.7 billion manats ($6.9 billion) in 2023. As a rule, budget expenditures in the second and third quarters do not reach peak levels.”

“To remind, Azerbaijan has sufficient resources to maintain a stable exchange rate and has one of the highest levels of international reserves adequacy in the CIS,” the Gazprom official said. “The country’s international reserves, including SOFAZ assets, were estimated at $66 billion as of August 1, exceeding 80% of GDP and covering 49 months of imports. Given that FX sales at CBAR auctions remain moderate, despite external risks, and are being determined mainly by the schedule of budget expenditures, we consider their dynamic as neutral for Azerbaijan’s sovereign ratings and Eurobonds.”