By Aynur Karimova
The decrease in foreign exchange reserves of the Central Bank of Azerbaijan will not have a negative impact on the country’s economy, Vugar Bayramov believes.
"The decrease of the foreign exchange reserves of the CBA is shown in a small figure. It is about a 0.2-percent decrease. The small level of decrease means that in the last three months, the central bank has been seeking to keep the level of the state's exchange reserves in a certain interval," the Chairman of the Center for Economic and Social Development told AzerNews.
Commenting on the CBA's recent statistical data, the expert also said that a decline in CBA exchange reserves will not increase pressure over the exchange rate of Azerbaijan's national currency, the manat.
"Thanks to the amendments made to the law ‘On the Central Bank of Azerbaijan,’ the CBA enjoys an opportunity to increase its reserves through domestic and external borrowings, as well as the issuance of bonds into circulation. Thus, despite the relative decrease in foreign exchange reserves, the CBA will try to compensate its intervention spending through issuance of bonds into circulation," he noted.
The foreign exchange reserves of the Central Bank of Azerbaijan decreased by $18.7 million (0.2 percent) in July 2015 compared to June and amounted to $8.5 billion.
The decline in the foreign exchange reserves of the central bank has been steadily observed since July of last year. In May-June 2015, the growth of foreign exchange reserves resumed. In May, the CBA’s reserves increased by $42.9 million (0.51 percent) compared to April and in June by $89.4 million (1.06 percent).
Bayramov went on to add that a decrease is observed in intervention spending by the central bank as well.
"This is particularly related with the increase in demand of the dollar. Azerbaijan observed the dollarization process from December 2014 to May 2015. Since May 2015, the country noticed the weakening of the dollarization process and exchange of dollars to manat by the citizens for current expenditures. This process affected the intervention spending of the CBA and lead to the decrease of such spending," he said.
Bayramov believes that the decrease of the exchange reserves of the CBA will not lead to a sharp decline in the exchange rate of manat or inflation.
"In current circumstances, there are no serious risks for the exchange rate of manat. Also, it will not cause inflation in the country. Due to the fact that the CBA will continue to fulfill its existing monetary policy and intervention spending, inflation or a decrease in the exchange rate of manat will not occur," the expert concluded.
CBA board chairman Elman Rustamov said earlier that the CBA continues to participate in the foreign exchange market of the country after the manat rate adjustment.
Rustamov explained this by the still ongoing process of dollarization.
“Many bank customers keep their funds in dollars, and we believe that this trend will continue towards increasing the dollar savings,” said Rustamov.
“We can’t restrain the population from keeping their funds in dollars. But we have a sufficient amount of currency reserve to allow the population to convert their funds into dollars without any problem,” he added.
The exchange rate of Azerbaijani manat was reduced to 1.05 manat to the U.S. dollar from February 21 (compared to 0.7844 manats earlier), which corresponds to a decline of about 33.9 percent.
Aynur Karimova is AzerNews’ staff journalist, follow her on Twitter: @Aynur_Karimova
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