What led to reduction of pressure on Azerbaijan's national currency?

The increase in prices for Azeri Light oil in the first half of 2022 by 68% and non-oil and gas exports by 25.4% compared to the same period last year has driven an increase in FX supply on the local market and reduced pressure on the manat, wrote Gulnara Khaidarshina, Deputy Head of Research Department at Russian Gazprombank, Chief Economist for CIS countries, Report informs.

“In particular, at the auction held on July 26, the volume of FX sales totaled $15.8 million, or 5.4 times less than the average level in 4Q21 during the peak of budget
expenditures. This creates conditions for replenishment of international reserves and supports a balance on the FX market without a tightening of monetary conditions,” Khaidarshina noted.

According to her, the situation on the FX market is stable, with the volume of FX sales by the sovereign fund (SOFAZ) at auctions remaining around recent lows.

“As we noted in our report of April 20 entitled “Azerbaijan: Strengthening of regional importance of economy amid external risks”, amid the aggravation of external geopolitical risks, Azerbaijan is a beneficiary of high hydrocarbon prices. In particular, the price of Azeri Light crude, according to SOCAR, averaged $110/bbl in 1H22, up 68% YoY. Moreover, non-oil & gas exports have increased, up by 25.4% YoY in 1H22 to nearly $1.5 billion,” Gazprombank economist emphasized.