By Trend

The stable situation in the foreign exchange market of Azerbaijan reduces further devaluation expectations, Deputy Head of the Market Research Department at Russian Gazprombank Gulnara Khaidarshina told Trend.

According to her, Azerbaijan's manat is supported by high oil prices, which have been at their highest since September 2014.

"Moreover, foreign currency sales increased by 13.9 percent at the auction of Azerbaijan's Central Bank as of Feb. 15 compared to the auction of the previous week but remained close to a 9-month low. The sale of foreign currency was 7.8 times lower than the maximum mark since the beginning of the COVID-19 pandemic, recorded in March 2020 ($323.2 million)," Khaidarshina said.

The representative of the bank noted that the observed trajectory of foreign currency sales at auctions is still determined by the schedule for financing budget expenditures according to the previously approved plans. Transfer from the budget of SOFAZ (State Oil Fund of Azerbaijan) for 2022 is planned at the level of 12.7 billion manat, or $7.5 billion (an increase of 4.1 percent compared to 2021).

She believes that in the short term there may be some pressure from imports on the volume of foreign currency sales at auctions.

"In value terms, imports grew by nine percent in 2021, up to $11.7 billion, with the largest increase in import prices in the fourth quarter. This pressure may ease in the second quarter of 2022 when global food prices exacerbate the slowdown due to the high base of last year," Khaidarshina said.

Azerbaijan has sufficient resources to maintain a stable exchange rate, being one of the CIS countries with the most international reserves. As of February 1, 2022, Azerbaijan's international reserves (including SOFAZ assets and 2021's receipt of SDRs from the IMF in the equivalent of $0.5 billion) were estimated at more than $53 billion and were close to 100 percent of GDP (estimated value, taking into account its growth by 5.6 percent in 2021), while covering 54 months of imports.

"Given that the external liquidity position is a sensitive factor for Azerbaijan's sovereign ratings, the continued low sales of SOFAZ currency in the economic recovery is a supporting factor for Azerbaijan's Eurobonds," Khaidarshina said.