Today.Az » Business » Azerbaijani central bank revises reserve management strategy
16 September 2013 [10:00] - Today.Az
By AzerNews
The Central Bank of Azerbaijan (CBA), whose strategic currency reserves form the country's strategic assets, has announced that it intends to increase its reserves transferred under the control of foreign managers.
The total CBA reserve assets held in foreign currency amounted to $12.72 billion in January-July 2013, increasing by 13.88 per cent compared to the same period of 2012. The figure is enough to finance nine-month imports of goods and services.
CBA Deputy Chairman Avtandil Babayev said a positive trend is seen in global markets, and conditions are shaping up for growth of the attractiveness of the traditional tools of reserve management.
He said the CBA was studying new tools to manage its foreign currency reserves.
"Currently the CBA's strategic currency reserves are at the level of $13 billion. We expect that the figure will hit $15 billion by late this year. Such an expectation was formed at the beginning of the year and the current results show that it's a real figure. Currently, external managers manage funds in the amount of $400 million and $300 million at the moment is transferred to administration. Our goal is to bring the volume up to $1 billion," he said.
The central bank developed a new strategy to manage its foreign exchange reserves in 2013, which implies diversification of financial tools and the geographic structure of reserves under the existing economic environment in the world.
According to Babayev, one of the changes in the bank's reserve management strategy involves increasing the investment part.
"This allows to use more active instruments. One of these instruments is the expansion of the institute of external control and the other one is geographic diversification. Geographical expansion involves the acquisition of securities in Asian markets, while such tools as the acquisition of shares in companies, real estate or gold, are risky for us," Babayev said.
The CBA says that some $2.33 billion or 18.32 per cent of the total volume of the reserve assets in foreign currency was placed in securities in January-July 2013.
Some $9.72 billion has been deposited in the accounts of other central banks, the International Development Bank (IDB) and the International Monetary Fund (IMF).
Earlier CBA deputy chairman Khagani Abdullayev said that the CBA does not expect any drastic shifts in the portfolio, but considers new tools in emerging markets. Basically, these are long-term securities and deposits, he added.
Babayev said further that the volume of foreign exchange intervention carried out by the CBA in 2013 exceeded expectations for the reporting period.
"By the end of the year the volume of currency purchases was planned at the level of $2 billion, but now this figure has already reached $1.5 billion, which exceeds the projections for this period. Interventions continue, and I think we will fulfill this prediction by the end of the year," Babayev said.
Governments with current account surpluses conduct currency intervention either to increase foreign exchange reserves or prevent national currency appreciation.
Babayev said that the situation with the supply of currency to the domestic market remains stable.
"Certain trends were observed in the balance of payments. For example, the balance of cash transfers was positive. But in general, it's difficult to speak about a major change in supply. No significant deviations are recorded and the dynamics is stable," he said.
In order to achieve the CBA's primary goals of maintaining currency stability and control over monetary policy, the bank maintains operational foreign currency assets, which are a group of liquid assets derived from foreign currency assets, to ensure timely intervention when deemed necessary.
Such a group of operational liquid foreign currency assets of the bank is adequate for meeting the foreign currency demand for currency intervention, financing foreign trade equivalent of three-month import, and financing short-term foreign debt of the country.
In 2012, the CBA's currency reserves totaled $11. 694 billion, having increased by $1.213 billion or 11.58 percent , through domestic FX market interventions and revenues generated by asset management.
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