Azerbaijan's strategic currency reserves top $54 bln in H1

By AzerNews

The total amount of the strategic currency reserves of Azerbaijan increased by 8.3 percent or $4.2 billion reaching to $54.4 billion in the first six months of 2014, the Central Bank of Azerbaijan (CBA) said in a report on monetary policy on the results for January-June 2014, published last week.

Azerbaijan's strategic currency reserves are sufficient to cover the three-year imports of goods and services.

"As in previous years, the external position of the country was at an acceptable level. As a result, positive developments in the foreign sector affect the dynamics of the foreign exchange reserves, which continued to increase this year," the report said.

The activity of foreign investors has increased in the country, and in January-June 2014 the total volume of foreign investments in the economy exceeded $2.8 billion, accounting for 30 percent of total investments.

According to the data released by the State Customs Committee, in the first half of 2014, the foreign trade turnover of Azerbaijan amounted to $15.4 billion, some $11.3 billion of which fell to export and $4.1 billion to import. Trade surplus amounted to $7.1 billion, and exports exceeded imports by three-fold in the reported period.

CBA's goal "is not to increase reserves, but to increase their stability."

Rapid growth of the currency reserves was the main factor for the formation of a strong macroeconomic buffer and reduction of sensitivity of the domestic economy towards external shocks.

The increase in reserves led to the maintenance of the continued net investment position of the country at an acceptable level.

Also, the CBA conducted sterilization of currency amounting to $967 million in the first half of 2014 in order to prevent a significant strengthening of manat, and thereby eliminating the negative impact of the competitiveness of the non-oil sector.

"With the balance of payments in the currency market supply exceeding, demand thereby strengthens the national currency. The central bank continued the exchange rate policy within the framework of bilateral targeting of dollar / manat in order to ensure a balance between supply and demand", the report says.

Since the beginning of the year, the rate of manat against the dollar has not changed, entrenching by 0.03 percent. The dynamics of the nominal bilateral exchange rate of manat affected the changes in the real bilateral exchange rate.

The bilateral nominal and real exchange rate of manat strengthened compared to the national currency of Ukraine, Georgia, Kazakhstan, China and Switzerland, and cheapened in comparison with the euro area, the United States, Turkey, Russia, Iran, Japan, Israel, Belarus, and the South Korea.

The Azerbaijani banks, the total number of which is equal to 44, increased lending to the economy by 21.64 percent in the first half of 2014 compared to the same period of 2013.

The banks delivered loans totaling 16.754.8 billion manat including 12.228.3 billion manat (73 percent) in national currency and 4.526.5 billion manat (27 percent) in freely convertible currency in the reported period.

For comparison, the figure was equal to 13.774.1 billion manat (9.750.3 billion manat in national currency and 4.023.8 billion manat in freely convertible currency) in January-June 2013.

The Azerbaijani banks increased the volume of consumer lending by 31 percent as well.

The share of consumer loans in total share of the loan investments by the banks amounted to 40.7 percent, or over 6.8 billion manats. For comparison their share accounted for 37.7 percent and the amount of loans about 5.2 billion manats in the reported period.

As of July 1, 2014, the total amount of bank deposits and deposits of physical and legal entities totaled around 13.4 billion manats, compared to around 11.4 billion manats as of July 1, 2013.

Around 62.5 percent of the population's funds were placed in the national currency, while over 2.522 billion manats in freely convertible currency. The Azerbaijani population's deposits in the national currency in the banks have prevailed over those in foreign currency since 2012.

As of July 1, the assets of the Azerbaijani banking sector amounted to 22.57 billion manats compared to 18.19 billion manats as of June 2013.

The bank assets increased by 24.1 percent during a year.

Loans and deposits issued by the banks to the financial sector amounted to 1.167 billion manats as of June 2014.

The number of payment cards in Azerbaijan has increased by 5.8 percent since early 2014 and stood at 6.003 million units as of June 2014, which is 13.2 percent more than in 2013.