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CBA says M3 reduction due to decrease of net foreign assets

16 November 2015 14:54 (UTC+04:00)
CBA says M3 reduction due to decrease of net foreign assets

By Aynur Karimova

The Central Bank of Azerbaijan has said the reduction in broad money supply (M3) in the country is mainly due to a decrease in net foreign assets.

"M3 rate has decreased by 3.88 billion manats or 18 percent up to 17.684 billion manats since early 2015,” the CBA's report on monetary policy as of January-September 2015 said. “Some 59.5 percent of 3.88 billion manats accounted for the net foreign assets."

As of October 1, 2015, some 68 percent of deposits were kept in foreign currency. At the same time, their share in M3 was 47 percent.

The processes on the currency market mainly affected the dynamics of changing the money supply structure during this period.

"The monetary base has decreased by 38.9 percent up to 7.050 billion manat since early 2015,” the report said. “The level of dollarization affected the decline in the money supply, while other factors (such as market operations of the Central Bank, etc.) increased."

The level of the monetary multiplier, which expresses the ability of the banking system to create money, was not greatly changed.

The manat money supply (M2) declined by 46.3 percent up to 9.369 billion manats in the first nine months of 2015. This is mainly connected with a decrease in cash money.

Earlier Kazakhstan's Kursiv newspaper reported that Azerbaijan ranks second among the CIS countries in terms of falling gold and exchange currency reserves.

"The Central Bank of Azerbaijan (CBA) used $6.74 billion of its gold and exchange currency reserves in January-September 2015, or 49.01 percent of its total sum,” the article said. “The drop in the country’s gold and exchange currency reserves is also associated with a decrease in oil prices. The CBA spent the reserves by conducting interventions on the foreign exchange market to restrain the favorable exchange rate versus the US dollar."

The rapid reduction of the reserves stopped at the end of the third quarter of 2015. The foreign exchange reserves, held by the CBA, fell to $7.015 billion as of late September, while the country's strategic reserves exceed $42 billion.

The official exchange rate on November 16 was 1.0506 AZN/USD.

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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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