Sufficient liquidity of Azerbaijani State Oil Fund’s funds - guarantee of fulfillment of its budgetary obligations

Economy Materials 13 March 2020 20:36 (UTC +04:00)
Sufficient liquidity of Azerbaijani State Oil Fund’s funds - guarantee of fulfillment of its budgetary obligations

BAKU, Azerbaijan, March 13

By Nargiz Ismayilova – Trend:

The main revenues of the State Oil Fund of the Azerbaijan Republic (SOFAZ) are generated as a result of the proceeds from the sale of oil and gas in the US dollars, SOFAZ told Trend.

The main part of SOFAZ’s expenses is its obligations on transfers to the state budget. To fulfill these obligations, SOFAZ will convert foreign currency into manat through auctions organized by the Central Bank of Azerbaijan.

This means that SOFAZ regularly carries out large-scale dollar interventions in the foreign exchange market.

As for the impact of possible further fall in crude oil prices on the fulfillment of SOFAZ’s obligations to make transfers to the state budget, SOFAZ stressed that the costs associated with transfers to the state budget are SOFAZ's responsibility and this obligation must be fulfilled regardless of fluctuations in crude oil prices.

SOFAZ's budget for 2020 envisages budgetary obligations in the amount of 11.6 billion manat ($6.8 billion). SOFAZ intends to put up for sale the foreign currency worth $6.8 billion this year to fulfill this obligation.

From the beginning of the year up till now, $1.8 billion or over 3 billion manat were put up for sale.

To fulfill the remaining obligation, SOFAZ plans to put up for sale $5 billion.

"There is sufficient liquidity in specific weight of SOFAZ’s funds, that is, assets that can be easily cashed out in a short period,” SOFAZ said. “These funds, which currently have a great share, are the biggest guarantee of full, accurate fulfillment of SOFAZ’s budgetary obligations.”

“Of course, while forming SOFAZ’s investment strategy, such important tasks as accumulation for future generations and ensuring insurance for the country's economy against external threats are taken into account in a balanced manner,” SOFAZ said. “However, despite the economic uncertainty directly affects the financial markets, this is observed in various investment assets differently.”

Thus, persistent negative expectations regarding the future of the global economy immediately have a negative impact on the stocks which are traded on the stock exchange.

At the same time, during a period of economic uncertainty, the demand for certain types of assets, including bonds, especially state bonds, increases greatly, which positively affects their prices.


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