No need for mandatory sale of assets to fulfill SOFAZ’s obligations

Economy Materials 6 April 2020 16:35 (UTC +04:00)
No need for mandatory sale of assets to fulfill SOFAZ’s obligations

BAKU, Azerbaijan, April 6

By Nargiz Ismayilova - Trend:

To fulfill the obligations of the State Oil Fund of Azerbaijan (SOFAZ), there is no need for an unlimited and compulsory sale of assets included in the investment portfolio, Trend reports referring to SOFAZ.

“SOFAZ’s forecasts related to the budget are approved on an annual basis and the level of implementation for the proposed budget year in different periods of this year is different,” the message said.

“So, depending on the requirements of the state budget and the changes in demand in the foreign exchange market, during the year the obligations may be unfulfilled in the same amount as by the months,” the message said. “At the same time, depending on the price of crude oil in the world market, the dynamics of SOFAZ’s income in different periods of the year may grow differently.”

“Thus, depending on the price factor for oil and the different execution of expenses in different periods, either an increase or decrease in SOFAZ’s assets by the end of a certain period during the year may be observed,” the message said.

“But irrespective of this, SOFAZ’s annual budgetary obligation cannot be higher than the level approved in the state budget as the annual upper limit of SOFAZ’s expenses has been set (although the execution in different months of the year may vary).

“Shortly, if income from SOFAZ’s investment funds is excluded, then the only factor affecting the level of SOFAZ’s funds at the end of each year is the change in oil prices in the world markets,” the message said.

“Every year SOFAZ transfers funds to the state budget in a certain amount, and SOFAZ, in turn, saves very short-term assets in the investment portfolio, at least up to this amount, to cover these costs,” the message said.

“At the same time, SOFAZ’s funds also play the role of a “safety cushion” during external shocks for the country's economy and are used to cover the fiscal deficit that may arise in the state budget,” the message said.

“Taking this into account, an important part of SOFAZ’s funds is high-quality liquid instruments that can be used immediately without causing harm,” the message said. “So, up to 70 percent of SOFAZ’s assets are debt portfolios and monetary market instruments.”

“By late March, the amount of cash received in the form of revenues only in the US dollar-assets amounted to about $4 billion,” the message said. “At the same time, SOFAZ will receive $2.4 billion to repay the main amount only in the portfolio of bonds denominated in the US dollars."


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