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SOFAZ increases sales of dollars to Azerbaijani banks

8 January 2019 17:30 (UTC+04:00)
SOFAZ increases sales of dollars to Azerbaijani banks

By Leman Mammadova

The State Oil Fund of Azerbaijan (SOFAZ) sold $677.1 million at currency auctions organized by the Central Bank in December 2018, Trend reports citing the Fund Jan. 8.

SOFAZ sold to banks $654.1 million in November. Since the beginning of the year, Azerbaijani banks have bought over $5.8 billion from the Fund.

The Oil Fund will continue the sale of foreign currency through auctions in 2019.

The sale of currency is carried out as part of SOFAZ transfers to the state budget of Azerbaijan, which are planned to stand at 10.966 billion manats in 2018.

The State Oil Fund of Azerbaijan is an institution established in 1999 with assets of $271 million aimed at efficient accumulation of resources and placement of assets abroad, as well as for the preservation and multiplication of funds received from the effective management of oil revenues in order to minimize the negative effect to the economy, prevention of "Dutch disease" to some extent, promotion of resource accumulation for future generations and support of current social and economic processes in Azerbaijan.

Based on SOFAZ's regulations, its funds may be used for the construction and reconstruction of strategically important infrastructure facilities, as well as solving important national problems.

The revenues of the State Oil Fund are formed primarily from revenues from the sale of oil, which remains at the disposal of Azerbaijan in accordance with production-sharing agreements.

In addition, SOFAR receives revenues from concessions of land plots in oil-bearing areas, from leasing of fixed assets, from oil transit, from the difference between the contract and sale price of exported oil, as well as bonuses and income from the profitable use of assets.

From early 2001 to December 1, 2018, revenues of SOFAZ as part of a project to develop the Azeri-Chirag-Guneshli oil and gas block in the Azerbaijani sector of the Caspian amounted to $137.446 billion. In January-November 2018, as part of the ACG project, the fund's revenues reached $8.96 billion. Revenues from the sale of gas condensate produced at the Shah Deniz field during the first 11 months of 2018 amounted to $222 million. In total, since 2007, SOFAZ gas sales revenues from Shah Deniz field amounted to $2.506 billion.

Under the presidential decree, as for the main directions of SOFAZ in 2019, SOFAZ funds will be mainly used for financing some measures related to accommodation and improvement of social and living conditions of refugees and IDPs, and transfers to the state budget of 2019.

The forecast aggregate value (weighted average volume) of investment portfolio of SOFAZ for 2019 is set at 67.4 billion manats.

The currency structure of SOFAZ’s investment portfolio is as follows: up to 50 percent in US dollars, 35 percent in euros, 5 percent in British pounds, and 10 percent in other currencies.

Meanwhile, SOFAZ’s investment portfolio can consist of four sub-portfolios: a portfolio of debt instruments and money market instruments - 55 percent of total portfolio value, a portfolio of shares - 25 percent, a portfolio of real estate - 10 percent, and a portfolio of gold - 10 percent.

SOFAZ has been included to the list of 100 most significant, resilient, and impactful asset owner and public executives of 2018, ranking 10th. The top 100 ranking has been compiled by the Sovereign Wealth Fund Institute (SWFI) based on several dimensions including, innovation, funding, environmental circumstances, returns, unique programs and initiatives undertaken.

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