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SOFAZ plans to keep assets volume unchanged

19 November 2015 17:05 (UTC+04:00)
SOFAZ plans to keep assets volume unchanged

By Aynur Karimova

Azerbaijan' state oil fund SOFAZ, an entity that accumulates and manages the country’s oil and gas revenues, plans to keep the volume of assets of 2016 at the level of 2015.

This was announced by Bahruz Bahramov, the head of SOFAZ Risk Management Department on November 19.

“Despite the fact that the budget expenditures of SOFAZ for 2016 exceed revenues, our main task is to prevent the decrease of the fund’s assets,” he told journalists. “The following year, efforts will be directed at stabilizing the level, and we expect to maintain it at the current level - nearly $35 billion.”

SOFAZ’s revenues are projected at 6.71 billion manats in 2016, which is 3.53 billion manats (34.5 percent) less than the forecast for 2015. SOFAZ’s expenditure is projected at 8.2 billion manats, which is 33.4 percent (4.1 billion manat) less than the expected volume in 2015.

Bahramov further said that transfers to the state budget in the future will remain at the same level or will be lowered in order to keep the level of assets.

The transfers of SOFAZ to the state budget are expected to reach 6 billion manats in 2016 or 4.388 billion manats (42.2 percent) less than in 2015.

SOFAZ expects its budget for 2015 to be deficit-ridden due to the long decline in world oil prices.

While drawing up the fund's budget for 2015, the basic parameters of the state budget were taken as a basis and the expected oil price was set at $90 per barrel. Taking into account an oil price of $50 per barrel, SOFAZ’s total income, including the proceeds from the sale of oil and gas are predicted at 7.4 billion manats until late 2015, which is 28 percent less than SOFAZ’s income approved for this year.

The fund's budget expenditure, including project financing and operation expenses, will amount to 9.6 billion manats, which is 19 percent less than the approved budget expenditures.

Thus, SOFAZ's budget deficit by late 2015 is forecasted at 2.2 billion manats.

SOFAZ to further diversify investment portfolio

SOFAZ, which was established in 1999 with an asset worth $271 million, plans to further pursue policy of diversifying its investment portfolio, according to Deputy CEO of SOFAZ Israfil Mammadov.

He assured that given today's economic conditions, expansion and further diversification of the investment portfolio of the fund is of strategic importance.

"To this end, we are considering various options for the diversification. This includes both the currency basket and purchase of various assets: stocks, real estate and gold. The acquisition of assets is precisely a priority for us, as in this case, currency portfolio expands automatically. For example, the Japanese yen also joined the currency portfolio of SOFAZ with the acquisition of real estate in Japan in September this year," he told Trend on November 19.

Acquisition of real estate is the most profitable investment for SOFAZ, according to him.

"Despite the fact that investing in real estate accounted for only 4.3 percent of SOFAZ's funds, they make up 15 percent of revenues of SOFAZ. From this point of view, the purchase of real estate in Japan is a very good investment," the deputy CEO added.

SOFAZ assets are placed partly in securities and partly in money market instruments.

According to SOFAZ's investment strategy, up to five percent of its investment portfolio may be placed in stocks, up to five percent in real estate, and up to five percent in gold.

The main goals of SOFAZ include the accumulation of revenues, the investment of assets abroad to minimize negative impacts on the economy, the prevention of 'Dutch disease', ensuring savings for future generations, and maintaining the current social and economic standards in the country.

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Aynur Karimova is AzerNews’ staff journalist, follow her on Twitter: @Aynur_Karimova

Follow us on Twitter @AzerNewsAz

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