BAKU, Azerbaijan, August 6. The assets size of the State Oil Fund of Azerbaijan (SOFAZ) is expected to keep increasing over the next few years, assuming oil prices at $50-70 per barrel over the medium term, Trend reports via the outlook from Moody’s Investors Service.
“Assets held by SOFAZ, which are foreign currency denominated and invested in liquid markets, continued growing in 2021 despite the pandemic. In time of high oil prices, the accumulation of hydrocarbon revenues at SOFAZ – rather than their use for budgetary purposes as per increasingly prudent fiscal management highlighted above – enables the sovereign to replenish its significant fiscal buffers, which Moody's expects to exceed 500 percent of general government debt this year,” the report said.
As Moody’s noted, large SOFAZ assets support Azerbaijan’s large net creditor position and contain external vulnerability risks, and can also be used to cushion external shocks, including through lower oil prices.
“Moody's expects large current account surpluses over the next few years (15-20 percent of GDP) due to high hydrocarbon prices, higher oil production quotas, and increased gas exports. Including SOFAZ assets, Azerbaijan's elevated external vulnerability indicator (around 80 percent) would decrease to under 20 percent,” the outlook said.
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