Azerbaijan 2nd among CIS countries for decrease in gold, exchange reserves

By: Aynur Karimova

Azerbaijan ranks second among the CIS countries in terms of falling gold and exchange currency reserves, Kazakhstan’s Kursiv newspaper wrote, citing its own analytical group, Kursiv Research.

“The Central Bank of Azerbaijan (CBA) used $6.74 billion of its gold and exchange currency reserves in January-September 2015, or 49.01 percent of its total sum,” the article said. “The drop in the country’s gold and exchange currency reserves is also associated with a decrease in oil prices. The CBA spent the reserves by conducting interventions on the foreign exchange market to restrain the favorable exchange rate versus the US dollar.”

The rapid reduction of the reserves stopped at the end of the third quarter of 2015. The foreign exchange reserves, held by the CBA, fell to $7.015 billion as of late September, while the country’s strategic reserves exceed $42 billion.

“Since early this year, almost all CIS countries have faced the need to maintain their national currencies, not waiting for the prices in the oil market to stabilize,” according to the article’s author. “Thus, the gold and currency reserves of CIS countries showed negative dynamics during the first nine months. The decrease in the volume of reserves was also due to the fall in gold prices.”

According to surveys by Kursiv Research, Russia is the absolute leader in terms of reductions in gold and currency reserves, while Kazakhstan heads the top three leaders spending gold and foreign currency reserves.

The currency reserves of the CBA have remained practically stable in the last three months. Only in July was a slight decrease observed, while in May and June, they increased compared to the previous month. The Fitch Ratings affirmed Azerbaijan’s rating, thanks to the stability of the CBA’s currency reserves.

The foreign exchange reserves of the CBA fell by $18.7 million (0.2 percent) in July 2015 compared to June and amounted to $8.5 billion.

The steady decline in the CBA’s foreign exchange reserves has been observed since July of last year. In May-June 2015, the growth in foreign exchange reserves resumed. In May, the CBA’s reserves increased by $42.9 million (0.51 percent) compared to April, and in June, by $89.4 million (1.06 percent).

Meanwhile, local analysts believe the decrease in foreign exchange reserves of the CBA will not have a negative impact on the country’s economy as the drop is quite small. The minor decline means that in the last three months, the central bank has been seeking to keep the level of the state’s exchange reserves within a certain range.

It is believed that a decline in the CBA’s exchange reserves will not increase pressure on the exchange rate of Azerbaijan’s national currency, the manat.

Thanks to amendments to the law “On the Central Bank of Azerbaijan,” the CBA enjoys the opportunity to increase its reserves through domestic and external borrowings, as well as the issuance of bonds for circulation. Thus, despite the dip in foreign exchange reserves, the CBA will try to compensate its intervention spending through the issuance of bonds.


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