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CBA: Azerbaijan’s strategic currency reserves up by 3.5 pct

31 October 2022 12:47 (UTC+04:00)
CBA: Azerbaijan’s strategic currency reserves up by 3.5 pct

By Ayya Lmahamad

Since the outset of 2022, Azerbaijan’s strategic currency reserves have increased by 3.5 percent, amounting to $55.1 billion, Central Bank Chairman Taleh Kazimov told a presser, Azernews reports.

The top banker added that the bank’s foreign currency reserves also increased by 8.4 percent up to $7.7 billion in January-September.

Foreign currency purchases

“Since the start of 2022, the Central Bank of Azerbaijan has purchased foreign currency in the tune of $967 million,” he said.

Taleh Kazimov emphasized that currently, the demand for the country’s national currency in the foreign exchange market of Azerbaijan is high.

“It’s likely that the CBA’s intervention in the foreign exchange market will remain purposeful until the end of this year. But the bank will pursue its monetary policy without affecting high economic activity,” he opined.

Inflation growth

The chairman stated that the bank doesn’t rule out the growth of inflation in Azerbaijan by the end of 2022.

“In September this year, the inflation in Azerbaijan amounted to 15.6 percent, core inflation to 14.1 percent, food inflation to 21.8 percent, non-food inflation to 10.5 percent, and inflation in the service sector to 11.4 percent,” he said.

He added that further growth in inflation is expected by 20 percent of producers.

“We believe that inflation in Azerbaijan is associated with imports,” he said.

Moreover, he emphasized that the CBA is aimed at the maximum reduction in inflation in the country. He stated that with the discount rate raising, the bank’s analysts observe positive changes in the market.

“The change in discount rate in one direction or another has a real impact on inflation. When the corridor that CBA sets is reached, the discount rate will be changed in the direction of revitalizing the financial market, rather than containing it,” he said.

Discount rate

The Central Bank also adopted a decision to raise the discount rate by 0.25 percent up to 8 percent. The upper limit of the interest rate corridor remained at the level of 9.25 percent, while the lower limit was raised by 1 percent up to 5 percent.

“The increase in the discount rate in Azerbaijan is primarily due to external factors,” Taleh Kazimov added.

Monetary policy

Taleh Kazimov stated that the bank has to pursue a tight monetary policy due to global events.

“Our observations of global events show that the instability of the global economies and the growth of inflation globally require the tightening of monetary policy in Azerbaijan as well,” he said.

Payment balance

Additionally, he stated that the volume of foreign trade in the current operation balance has increased by 3.1 times compared to the corresponding period of 2021.

“International Monetary Fund (IMF) forecasts global energy prices to be at the level of $98.9 at the end of this year, and $85.52 at the beginning of the next year. And this allows CBA to say that balance of payments will be in surplus in 2023,” he said.

He stated that non-oil exports grew by 17 percent, adding that energy prices are also rising.

“We expect that the cost of one barrel of oil in 2022 will be $98.2, and in 2023 - $85.52. This creates a basis for us to maintain the stability of the country's economic growth,” he said.

Western sanctions against Russia

Taleh Kazimov also underlined that the CBA exercises control given the Western sanctions against Russia, noting that each bank, including the Central Bank, is attentive to its reputation.

"The Central Bank of Azerbaijan continues to retain control, considering the sanctions imposed by Western countries on Russia. We have not noticed any actions that could come under the sanctions," he concluded.

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Ayya Lmahamad is AzerNews’ staff journalist, follow her on Twitter: @AyyaLmahamad

Follow us on Twitter @AzerNewsAz

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