BAKU, Azerbaijan, April 22
By Eldar Janashvili – Trend:
Liquid and stable profitable instruments of State Oil Fund of Azerbaijan (SOFAZ) allow minimizing the impact of global shocks on the SOFAZ’s assets, Executive Director of the Center for Analysis of Economic Reforms and Communication(CAERC) Vusal Gasimli said, Trend reports.
Gasimli added that the current low oil prices are reducing the income of sovereign funds amid an increase in their expenses on fighting the pandemic and depreciating assets in the securities market by 20-25 percent.
The executive director noted that according to JPMorgan estimates, under the influence of a global pandemic, sovereign funds in the world suffered capital losses of about $1 trillion, and by the end of 2020, assets of sovereign funds in the Persian Gulf will be reduced by $296 billion.
The largest sovereign fund in the world, the Government Pension Fund of Norway, lost $113 billion in the first quarter of 2020, which is almost three times more than the assets of SOFAZ.
“As a result of global shocks, the negative difference in short-term market value caused by the revaluation of SOFAZ’s assets amounted to 2.1 billion manat [$1.2 billion] in the first quarter of 2020. Since over 80 percent of SOFAZ’s investment portfolio is liquid and stably profitable instruments, the impact of global shocks on the fund’s assets can be minimized," he said.
"At the same time, 66 percent of the fund’s investment portfolio is in US dollars, and the real effective exchange rate of this currency has risen by 8.5 percent since the beginning of 2020. The real effective exchange rate of the euro, which holds 22.8 percent of the fund’s resources, has also risen by three percent since the beginning of 2020,” the executive director stressed.
Gasimli noted that the term for placement of 37.8 percent of SOFAZ’s bonds and instruments of the money market is up to one year, which allows satisfying liquidity requirements as soon as possible.
In any case, the fight against the crisis at the expense of the country's internal capabilities, without resorting to external borrowing and devaluation, will have a positive impact on the process of economic recovery in the post-pandemic period, he concluded.
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