New Decline in Azerbaijan Central Bank’s Currency Reserves

New Decline in Azerbaijan Central Bank’s Currency Reserves

The Central Bank of Azerbaijan (CBA) has reported that its currency reserves has continued falling in September 2015. The CBA reports that as of October 2015 its currency reserves totaled $7.044 billion US versus $7.315 billion US by September 2015.

Reminded here that the currency reserves were $8.501 billion US by August, $8.52 billion US by July, $8.43 billion US by June, $8.397 billion US by May, $9.47 billion US by April, $11.004 billion US by March, $12.68 billion US by February $13.758 billion US by January 2015. For comparison, CBA currency reserves reached $15.19 billion US (absolute record) by August 2014. They totaled $14.15 billion US by January 2014 and $11.69 billion US by January 2013.

De-facto, the current level of reserves is equivalent to the index by December 2011 ($7.027 billion).

Decline of CBA currency reserves in September 2015 totaled $271.2 million US (-3.7%).

In 2015 their fall is still $6.714 billion US (-48.8%). Since August 2014 they have fallen by $8.149 billion US.

The main reason of CBA’s high intervention cost in September 2015 was the continuation impacts of currency panic which happened after Kazakhstan’s national currency’s devaluation previous month. Very high demand for foreign currency has been observed the mid of August particularly the second weekend of the month. Due to the artificial panic in the currency market, some householders purchased foreign currency with high rates those days. Demand for foreign currency was decreased in September 2015 compared to August 2015. However, both householders and business still have demand for foreign currency.

Meanwhile, CBA administratively decreases volume of national currency in the currency market. CESD’s monitoring show that many currency exchange offices faces lack of the manat volume in last couple weeks. Although demand for the national currency is not increased, but volume of the manat is administratively controlled by CBA. Central Bank targets using such administrative methods to decrease a demand for foreign currencies.

CESD, however, expects that the Government of Azerbaijan will keep the manat’s current rate against US dollar within its corridor in up-coming months. Due to economic and social reasons, CBA will most likely not go sharp devaluation by December 2015. New devaluation may have negative affect on the economy, particularly on banking sector, private sector and will increase Consumer Price Index.

CESD underlines that CBA will most likely borrow foreign currency from local and international sources to keep its foreign currency reserves’ volume. The center also forecasts that demand for foreign currency will be comparatively declined in the fall of 2015 due to gradual appreciation of the manat.

© CESD, 2015

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