SOFAZ to expand currency basket

By Gulgiz Dadashova

Azerbaijan's state oil fund SOFAZ which is in charge of accumulating and managing the country's oil and gas revenues, keeps on agenda the inclusion of Chinese yuan in the Fond’s currency basket

SOFAZ head Shahmar Movsumov told Trend that SOFAZ’s all assets, including the investment portfolio, are in foreign currency.

"SOFAZ’s assets are in US dollars, euros, British pounds and other currency for diversification,” he said. “Taking into account that the assets in foreign currency impact the balance sheet in manat, the fluctuations in foreign currency exchange rates versus the manat lead to the exchange rate difference."

"This exchange rate difference is the accounting profit or loss as a result of those assets in manat and national currency fluctuations compared to other currencies, even if there is no change in the foreign currency assets," he said. "Thus, depending on the currency fluctuations, the mentioned exchange rate difference can be either SOFAZ’s loss or profit. However, given the fact that it is of accounting nature, it has no effect on the real value of SOFAZ’s all assets in foreign currency."

As part of SOFAZ’s investment policy, up to 50 percent of the assets are in US dollars, up to 35 percent in euros, up to five percent in British pounds, but the remaining 10 percent in other currency, including the Russian ruble, the Australian dollar, Korean Won, Turkish lira.

"We will consider the issue of including the Chinese yuan in SOFAZ’s currency basket in 2015,” Movsumov said. “SOFAZ’s assets were quite diversified by asset allocation in different currencies to minimize the currency risks."

The State Oil Fund was created in 1999 and its assets were $271 million that time.
The assets of SOFAZ increased by 3.42 percent and hit $37.104 billion as of Jan.1, 2015, compared to early 2014 (nearly $35.878 billion).

The main goals of SOFAZ include accumulation of resources and placement of the Fund's assets abroad in order to minimize the negative affects on economy, the prevention of 'Dutch disease' to some extent, promotion of resource accumulation for future generations and support of current social and economic processes in Azerbaijan.

The Fund is following its peers in countries from Norway to Singapore by moving into real estate as the lowest crude prices since 2009 erode revenue of the third-biggest oil producer among FORMER Soviet republics.

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