Gazprombank: Azerbaijan has sufficient resources to maintain stable exchange rate

Azerbaijan has sufficient resources to maintain a stable exchange rate and has one of the highest levels of international reserves adequacy in the CIS, Gulnara Khaidarshina, deputy head of research, chief CIS economist at Russia’s Gazprombank, said, according to Report.

"Based on the latest data on SOFAZ assets for 1Q23, the country’s international reserves were estimated at $62.5 bln as of July 1, approaching 80% of GDP and covering 45.7 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," she noted.

Khaidarshina that the volume of FX sold at the auction held on July 18 totaled $32.1 mln.

"The volume of FX sold at yesterday’s auction remained at the previous week's level. Notably, FX sales at CBAR auctions are still moderate: Tuesday’s sales were 39.6% below the average level in 4Q22, when budget expenditures peaked, and 10.1x less than the highest amount since the onset of the pandemic, recorded in March 2020 ($323.2 m)," she said.

Khaidarshina believes that the volume of FX sales at CBAR auctions remains in line with the schedule of budget expenditures.

"We still believe that the spike of FX sales in mid-December was a one-off and primarily due to budget spending, which peaked that month. Taking into account amendments approved in first reading, transfers to the state budget from SOFAZ are slated at AZN 11.7 bln ($6.9 bln) in 2023. As a rule, budget expenditures during the second and third quarters do not reach peak levels. Therefore, assuming stabilization on the hydrocarbon market, we do not expect a significant spike in FX sales by SOFAZ over the next two months," the chief economist at Gazprombank said.