National Bank of Azerbaijan Reduces Monetary Reserves because of Statistic Calculation: Deputy Chairman of Board

Business Materials 25 November 2008 18:13 (UTC +04:00)

Azerbaijan, Baku, 25 November / Trend corr. I.Khalilova/ "The National Bank of Azerbaijan (NBA) expects to increase its monetary reserves to $5.6-5.7bln by the end of 2008," Avtandil Babayev, the deputy chairman of the Board and general director of the NBA, said on 25 November.

"We have chosen more conservative policy while managing with monetary reserves and are basing on three principles, including security, liquidity and income. Providing their security is at the first place," Babayev said.

According to Babayev, the NBA preserves its monetary reserves in accounts of the US Federal Reserve System (dollar part of reserves) and the Central Bank of the United Kingdom (pound sterling) to provide great security. Reserves in the European currency have been deposited in the most stable contractors.

This policy has enabled to get additional income at $152mln since the beginning of 2008.

According to the NBA's general director, recent changes in amounts of monetary reserves and some of their reduction is explained with influence of a new strategy of management with reserves. Portfolio of monetary reserves has been divided into operation and investment part since the end of 2007. Operation part serves as a source for short-term management quickly to react to operations within the framework of monetary and exchange policy and trade balance. Investment part of reserves is passed to more long-term management.

[If monetary reserves of the country amounted to $5438.6mln on 30 September, while they were reduced by 2.3% ($122.6mln), amounting to $5316mln on 31 October.]

The second reason of volatility in dynamics of monetary reserves became diversification of reserves at currency portfolio, Babayev said. At present 60% of portfolio has been deposited in dollar, 30% - in Euro and the rest - in pound sterling.

"Considering that statistic calculation of monetary reserves is being held in dollar in accordance with changes of exchange rates in the light of world processes, as well as affects dynamic of the NBA's reserves," the deputy chairman of the Board of the NBA said.

In this regard, Babayev regards correct to speak about reduction of monetary reserves, because they made up $4,015,000 at the beginning of 2008, whilst at present they reach $5,270,000.

Babayev expects rise of reserves by the end of 2008 and its connected to necessity in additional intervention in connection with rise of budget expenditures by the end of 2008. Respectively, a need will arouse in conversion of monetary component of the state expenditures. According to the NBA's forecasts, it is expected that amount of currency intervention will reach $2bln in 2008 and the NBA has realized buy-up of currencies from the currency market at $1.6bln since the beginning of the year.

At present strategic monetary reserves of the country exceed $18.2bln.

The correspondent can be contacted at [email protected]