By Azernews

By Sara Israfilbayova

The aggregate value (weighted average volume) of investment portfolio of Azerbaijan’s oil fund SOFAZ for 2017 is forecast at 51.24 billion manats ($30 billion).

This is reflected in the decree of Azerbaijan’s President Ilham Aliyev on the approval of main directions of the use of SOFAZ funds and investment policy for 2017.

The forecast for 2016 was at the level of 51.3 billion manats ($30.1 billion), for 2015- 28.2 billion manats ($16.6 billion), for 2014 – 27 billion manats ($16 billion), for 2013 – 25.2 billion manats ($15 billion) and for 2012 – 23 billion manats ($13.5 billion). 

The main areas of SOFAZ spending in 2017 will be:  financing of some measures related to accommodation and improvement of social and living conditions for refugees and IDPs; transfers to the 2017-state budget; transfers to the Central Bank of Azerbaijan to ensure financial stability; financing of reconstruction of the Samur-Absheron irrigation system; financing of the Baku-Tbilisi-Kars railway project; financing of the state program on education of Azerbaijani youth in foreign countries in 2007-2015; financing of Azerbaijan’s share in the Southern Gas Corridor projects.

Under the presidential decree, the currency structure of  SOFAZ’s investment portfolio is as follows: up to 50 percent invested in assets denominated in US dollars, 35 percent - in Euros, 5 percent - in British pounds, and 10 percent - in other currencies.

The Fund’s investment portfolio can consist of four sub-portfolios: a portfolio of debt instruments and money market instruments – 60 percent of total portfolio value, a portfolio of shares – 25 percent, a portfolio of real estate – 10 percent, and a portfolio of gold – 5 percent.

SOFAZ was established under the Presidential Decree, dated December 29, 1999, "On Establishment of the State Oil Fund of the Republic of Azerbaijan". 

The main purpose of the establishment of the Fund was to preserve and multiply the income derived from oil, create an excellent economic base, taking into account social needs, the requirements of economic progress and development of the country. Besides, the challenge ahead is to protect the country's economy from possible negative influences caused by the growth of foreign exchange earnings and avoidance of damage to financial discipline.

The total volume of SOFAZ investment portfolio amounted to $33.2 billion as of April 1, 2017, or 99.98 percent of total assets.

In the first quarter of 2017, 12.9 percent of the investment portfolio of SOFAZ was invested in shares, while last year this figure was 12.2 percent.  Some 88 percent of the investment portfolio was invested in financial instruments for a period of up to five years, and 21.1 percent of are invested in real estate, stocks and gold.

Currently, about 3.6 percent of the investment portfolio is invested in gold, 4.6 percent – in real estate, 12.9 percent – in shares.