Azernews.Az

By Gulgiz Dadashova

Energy producing countries could be hit by another economic shock after the price of world oil plunged, with Brent dropping to seven-year lows - below $40 a barrel.

Especially after OPEC failed to agree the production quotas at the meeting on December 4, experts do not expect any rise in prices for oil in the near future, which will surely negatively affect the national currencies of the energy producing countries.

Kazakhstan’s tenge, the world’s worst performing currency in 2015, has already dropped to its weakest rate as the oil price slump spurred a flight to USD.

The tenge slumped 5 percent to 330.72 against the dollar at 12:47 p.m. in Almaty, the most on an intraday basis since November 5, according to data compiled by Bloomberg.

Azerbaijan, which relies on hydrocarbons for more than 90 percent of exports and 65 of the state budget revenues, devalued its currency manat by third in February 2015. The continuous fall in the crude prices poses a new test for the country’s Central Bank.

Expert Ogtay Hagverdiyev believes that theoretically, Azerbaijan should remove the trading corridor on its national currency, the manat, thereby allowing it to float freely.

"Under the current reality, it is hard to say what is better; to let manat to float freely or hold devaluation,” he said, facing difficulty to answer how the government and the CBA will act given the decreasing oil prices.

The official rate of the US dollar and the euro to Azerbaijani manat as of December 14 is set at 1.0494 manats and 1.1501 manats, respectively.

Although, the CBA spent a considerable part of its foreign exchange reserves to maintain the level of manat, the difficult situation in the world economy is still far from stabilization.

Price of the Brent crude oil at the London ICE fell $0.26 to trade at $37.67 on Monday. A barrel of Azeri Light crude oil decreased $1.52 to stand at $38.90 on the world markets.

Since early 2015, the foreign exchange reserves owned by the CBA, decreased by $6.714 billion (48.8 percent), the Bank reported in October. In September, the Central Bank's foreign exchange reserves declined by $271.2 million (3.7 percent) to $7.044 billion compared to August 2015.

The decline in the CBA foreign exchange reserves has been observed since July 2014 due to an increase in demand for dollar supply in the country.

Meanwhile, assets of Azerbaijan' state oil fund SOFAZ slowly decrease. As of October 1, 2015, SOFAZ assets accounted for $34.738, depreciating by $729 million or 2.1%.

SOFAZ’s revenues are projected at 6.71 billion manats in 2016, which is 3.53 billion manats (34.5 percent) less than the forecast for 2015. SOFAZ’s expenditure is projected at 8.2 billion manats, which is 33.4 percent (4.1 billion manat) less than the expected volume in 2015.

Bahruz Bahramov, the head of SOFAZ Risk Management Department earlier said that transfers to the state budget in the future will remain at the same level or will be lowered in order to keep the level of assets.

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