SOFAZ talks budget execution expectations for 2016
Baku, Azerbaijan, Nov. 2
By Maksim Tsurkov – Trend:
Despite the fact that the budget of the State Oil Fund of Azerbaijan (SOFAZ) was approved with a deficit of six billion manats in early 2016, it is forecast that the actual revenues and expenses of the fund will be equal by late 2016, SOFAZ told Trend.
The budget of SOFAZ for 2016 was drawn up on the basis of the oil price of $25 per barrel set in Azerbaijan’s state budget. Thus, taking into account this price, the president of Azerbaijan by his decree approved the revenue part of the fund’s budget in the amount of 4.58 billion manats, and expenses of the fund were approved at 10.67 billion manats. The budget deficit was projected at 6.09 billion manats.
“During the year, oil prices were above the budgeted level, and in the end, revenues of SOFAZ increased in comparison with the approved rates,” the fund noted. “As of October 28, the average weighted price of the oil sold amounted to $40.5. As a result, the general revenues of the fund, including from the sale of oil and gas amounted to 7.2 billion manats, which exceeds the annual rate by 57.5 percent.”
By late 2016, given the current oil price of around $50 per barrel, SOFAZ expects additional revenues of $1.2 billion, or 1.9 billion manats. As a result, general revenues of the fund are projected at 9.1 billion manats at the end of the year, which will exceed the forecast figure (4.6 billion manats) by 98 percent.
“It should be noted that the Azerbaijani government's decision to release the bonds of the Southern Gas Corridor CJSC in the amount of around $1 billion helped to raise additional funds, which made it possible to reduce the expenses of SOFAZ,” the fund added.
“Given the savings in connection with the issuance of bonds, general expenses of SOFAZ in 2016 are forecast at 9.1 billion manats, which will amount to 85 percent of the budget figure (10.7 billion manats),” the fund noted.
“At the same time, it’s necessary to remember that the investment portfolio of SOFAZ is formed out of the assets composed of US dollars, as well as euros, pounds and other currencies,” the fund said.
“The forecast size of the SOFAZ assets denominated in US dollars as of late 2016 compared to early 2016 may change depending on the exchange rate difference of the above mentioned currencies against the US dollar during that period,” SOFAZ added.
The assets of SOFAZ have increased by 6.7 percent as of Oct. 1, 2016 and stood at $35.82 billion as compared to $33.57 billion in early 2016.
SOFAZ was established in 1999 with assets of $271 million.
Based on SOFAZ's regulations, its funds may be used for construction and reconstruction of strategically important infrastructure facilities, as well as solving important national problems.
The main goals of the State Oil Fund are accumulation of resources and placement of the Fund’s assets abroad in order to minimize the negative effect on the economy, prevention of "Dutch disease" to some extent, promotion of resource accumulation for future generations, and supporting current social and economic processes in Azerbaijan.
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