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SOFAZ to save $2 bln in 2016

21 December 2015 16:58 (UTC+04:00)
SOFAZ to save $2 bln in 2016

By Nigar Orujova

The State Oil Fund of Azerbaijan will save nearly $2 billion due to the devaluation of the manat in 2016, SOFAZ told Trend on December 21.

The value of Azerbaijan’s national currency, the manat, dropped on December 21, following the Central Bank of Azerbaijan (CBA) decision to allow a freely floating exchange rate.

The exchange rate between the manat and US dollar changed from 1.0499 to 1.5500 after the policy shift. The official exchange rate of euro to Azerbaijan’s manat was set at 1.6850 manats.

SOFAZ has covered all expenditures for the current year, including transfers to the state budget.

“By transferring 980 million manats to the state budget in December, SOFAZ brought the payments up to the planned 8.13 billion manats,” SOFAZ said. “In this regard, SOFAZ does not expect savings as a result of the devaluation of the manat in 2015.”

As for 2016, SOFAZ forecasts savings in the amount of 1.94 billion manats.

"According to SOFAZ’s draft budget-2016, the expenditure reach 8.26 billion manats, or $7.87 billion at the rate of 1.05 AZN/USD which was during the period of approving the project,” SOFAZ said.

“Among SOFAZ’s all expenses in 2016, only expenditures on the Southern Gas Corridor and the Baku-Tbilisi-Kars projects are envisaged in dollars worth 1.87 billion. The rest expenditures are envisaged in manat in the amount of 6.3 billion. According to the new exchange rate, this reaches $4.07 billion (instead of 6 billion before the devaluation). Thus, this will allow saving $1.94 billion on the conversion in the future."

SOFAZ assets reduced by 6.38 percent compared to early 2015 ($37.1 billion) and were estimated at $34.74 billion as of October 1.

SOFAZ was established in 1999 with assets of $271 million. 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 main goals of the State Oil Fund include accumulation of resources and the placement of the fund’s assets abroad in order to minimize the negative affect on the economy, the prevention of "Dutch disease" to some extent, promotion of resource accumulation for future generations and support of current social and economic processes in Azerbaijan.

After the switch, the Central Bank of Azerbaijan also has increased its official foreign exchange reserves by more than 3 billion manats based.

The volume of official foreign exchange reserves held by the Central Bank amounted to $6 billion 245.6 million as of December 1. At today’s exchange rate, foreign exchange reserves of the CBA in manat equivalent have made 9,681 million manats.

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