Azerbaijani currency widely used in cross-border trade - CBA
By Gulgiz Dadashova
Azerbaijan's currency, manat, is currently the most stable and reliable currency in the region and enjoys high public interest.
Central Bank of Azerbaijan (CBA) Board Chairman Elman Rustamov made the remarks at the October 7 meeting of the Cabinet of Ministers chaired by President Ilham Aliyev, which focused on the results of socio-economic development of the country over nine months of 2013 and outstanding tasks.
Rustamov said that a number of leading central banks take interest in the manat as a reserve currency, and the manat is widely applied in cross-border trade.
In 2013, the CBA continued its exchange rate policy in the framework of bilateral targeting of the dollar/manat and ensured stability of the bilateral exchange rate of both currencies.
In January-August 2013, the manat rate remained stable. The average rate of the manat was 0.78 manats per dollar, 1.04 manats per euro, and 2.37 manats per 100 Russian rubles in August.
Rustamov said that during the first three quarters of 2013, Azerbaijan's economy was dynamic, stable and sustainable.
"In 2013, the CBA could achieve its goals directed to maintaining single-digit inflation, stability of the national currency, financial stability, and deepening financial intermediation. During the first nine months, the central bank conducted monetary policy in view of the dynamics of economic growth and inflation expectations, which enabled it to maintain macroeconomic stability, achieve price stability and retain the stable exchange rate of the manat," Rustamov said.
The rate of the manat against the U.S. dollar rose by three points, or 0.38 percent. The exchange rate of the U.S. currency fell from 0.7847 manats to 0.7844 manats since the beginning of the year.
The rate of EUR/AZN was characterized by strong volatility dynamics in January-August 2013. During this period, the euro exchange rate in Azerbaijan rose by 1.53 percent (from 1.0229 manats per euro to 1.0386 manats per euro).
According to Rustamov, the CBA made efforts to preserve the stability of the manat and the central bank sterilized currency in the amount of $1.7 billion to prevent a sharp strengthening of the national currency.
"From January to September, the central bank's foreign exchange reserves increased by 13 percent to $13.3 billion," Rustamov said.
The CBA has formed operational foreign currency assets, which are a group of liquid assets to ensure timely intervention to achieve its primary goals of maintaining currency stability and control over monetary policy.
This group of operational liquid foreign currency assets is adequate to meet the foreign currency demand for currency intervention, to finance a foreign trade equivalent of three-month imports, and to finance short-term foreign debt of the country.
In 2012, the CBA's currency reserves totaled $11.694 billion, having increased by $1.213 billion or 11.58 percent through domestic FX market interventions and revenues generated by asset management.
Rustamov also predicted the price stability in the country until the end of 2013.
"In this period, the price stability was ensured and the average annual inflation rate was only 2.3 percent. The rate of income growth exceeded the growth rate of inflation. As a result, the real income rose more than five-fold. The average inflation in the countries that are major foreign trade partners of the country exceeded inflation in Azerbaijan by 2.8 percentage points. Thus, it is predicted to keep the price stability until the end of 2013," Rustamov said.
The process of a decline in average interest rates on loans and deposits has been observed in Azerbaijan since the beginning of the year, he added.
"In the first nine months of 2013, the central bank continued work to maintain confidence in the banking system, to improve the financial stability and to shape risk-based supervisory work. In this period, it was possible to improve the quality, liquidity and profitability of bank assets, and adequacy of capital across the sector remained high," Rustamov noted.
According to him, financial intermediation expanded in this period.
"According to preliminary statistics, the bank's assets grew by 14 percent and credit investments more than 17 percent. Loans to households rose by 30 percent, the agriculture and processing sectors by 30 percent, transport and communications by 12 percent. Deposits of the population increased by 20 percent to 6.1 billion manats compared to the beginning of the year. The capital position of the sector was satisfactory. During the first nine months, the aggregate capital market grew by more than 19 percent, capital adequacy ratio hit 17 percent, while the norm is 12 percent. Financial indicators of the banking system improved. Thus, the net profit of the banking system more than doubled compared to the same period of last year, " he said.
Azerbaijani banks increased lending to the economy by 18.6 percent in January-August 2013, and by 30.7 percent year-on-year.
According to the CBA, the banks issued loans worth 14.455 billion manats, including 10.261 billion (71 percent) in national currency and 4.194 million (29 percent) in foreign currency.