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Easing monetary policy contributes to multiple growth in money supply in 2020 - CBA

Finance Materials 21 January 2021 20:39
Easing monetary policy contributes to multiple growth in money supply in 2020 - CBA

BAKU, Azerbaijan, Jan. 21

By Zeyni Jafarov - Trend:

The change in the single treasury account, which is formed depending on the revenues and expenditure of the state budget, became the main factor influencing the money supply during 2020, the Central Bank of Azerbaijan (CBA) told Trend.

“The money supply in manat has grown by 7.1 percent since early 2020,” the CBA said. “The CBA’s necessary liquidity support amid coronavirus pandemic has also impacted the money supply, which has increased by 52 percent since early 2018, when monetary policy in Azerbaijan began to ease.”

The CBA stressed that the easing of monetary policy was accompanied by a decrease in interest rates on deposit operations and short-term bills of the CBA, as well as a decrease in yields on state securities.

“In general, the average interest on new loans in manat decreased by 5.5 percentage points from 2018 through 2020 while in the real sector, risks exacerbated by the impact of the pandemic limited further interest rate decrease,” the CBA said.

"To effectively manage liquidity in the Azerbaijani economic segment, the CBA adequately uses various market operations while depending on the liquidity of the banking system, the demand for sterilization instruments of the bank fluctuates,” the CBA said.

“As a result, the CBA held 62 deposit auctions in 2020, however, starting from 2021, auctions for the placement of the CBA’s notes are mainly used to regulate liquidity,” the CBA said. “The auctions on notes are preferred and the main reason is the further development of the interbank money market. Thus, the presence of notes in the portfolio of banks increases the possibility of conducting secured transactions in the monetary market."

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