Experts about AZN 7.5 Billion Transferred from State Oil Fund to Central Bank

The decision on the transfer to the Central Bank of 7.5 billion manat to ensure macroeconomic stability of the country has caused a mixed reaction of economists.

The editor in chief of the journal Economic Forum Samir Aliyev said the Central Bank and the State Oil Fund in 2017 will bring to the foreign exchange auction $ 7.7 billion. The average per month will be $ 352 million.

“This means that if there is no force majeure, namely, a political crisis, a financial panic, or a sharp drop in oil prices, these transfers will soothe the financial market in 2017. Banks will restore the dollar sale and the black market will lose its relevance,” Aliyev said.

At the same time, according to the economist, currency failure can be prevented at the expense of the State Oil Fund's assets and reserves of the Central Bank, but it will be a temporary solution. This means to hope for the growth of oil prices in the world market.

“With this decision, the government has received a reprieve for a period of 1 year. Obviously, the rate of national currency will be supported by the Central Bank and the depreciation of the manat this year is unrealistic,” he said.

However, Aliyev said that at the end the policy to ensure the dollar exchange market by the State Oil Fund money may fail and cause the loss of the "safety cushion".

The Deputy Chairman of the Public Association for Assistance to Economic Initiatives Rovshan Agayev believes that this decision was dictated by despair. According to him, it is clear that a further depreciation of the manat is threatening the government, both in the political and socio-economic points of view.

 “From a strategic point of view, this decision will have a negative impact, as foreign exchange reserves will be reduced with a faster pace. After 2017 there could be even greater losses and shaking,” he said.

The Executive Secretary of REAL Movement, an economist Natig Jafarli, in turn, considers this decision meaningless and illogical. According to him, this is similar to money shifted from one pocket to another and spent then.

“The government has decided to spend another $ 4.5 billion for the dollar not to exceed the mark of AZN 2. This is the only goal. The State Oil Fund intended for future generations will melt at high speed. In parallel, the state debt will increase, and in two years we will face the threat of default,” Jafarli said.

The head of the Center for Economic Research Gubad Ibadoglu, referring to this decision, pointed out that the costs related to the crisis will be financed from SOFAZ, according to the agreement. Transfers from the State Oil Fund are planned to amount to approximately 90% of the revenue projected for this year.

“This is a violation of the spending limit set by the principle of constant real spending of the State Oil Fund in the long-term revenue management strategy on oil and gas.”    D71