SOFAR coped with financial difficulties in 2023
In the backdrop of global market turbulence, the State Oil Fund of Azerbaijan (SOFAR) navigated the financial challenges of 2023, marked by heightened volatility in the international markets. The year unfolded as a period of economic uncertainty, spurred by apprehensions surrounding global economic growth and inflation, especially amidst tightening policies by central banks in several developed countries.
Contrary to earlier recession expectations, the year witnessed a deceleration in inflation across developed nations, coupled with positive trends in various economic indicators, particularly towards the year-end, exerting a favorable influence on overall economic growth. Notably, this economic oscillation had a discernible impact on the profitability of financial assets.
After two consecutive years of losses, most bond indices staged a recovery, closing the year with positive returns. Simultaneously, major stock indexes demonstrated profitability by the year-end, buoyed by optimistic projections for inflation and the anticipation of interest rate reductions by central banks in developed countries.
Amidst this market backdrop, the State Oil Fund of Azerbaijan reported a noteworthy return on investments for 2023, standing at 7.1%, marking the highest rate of return since its inception. The fund's revenues for the year totaled 21 billion 661.9 million manats, with significant contributions from the sale of profitable oil and gas, transit, bonuses, acre payments, and returns from fund management.
While the fund's expenditures amounted to 11 billion 832.6 million manats, including transfers to the state budget of Azerbaijan and allocations for strategic educational programs, prudent financial management resulted in a surplus of 9 billion 829 million manats. This surplus, coupled with income from fund management, contributed to a remarkable 14.3% increase in SOFAR's assets, reaching $56 billion 69.7 million as of December 31, 2023.
The State Oil Fund's resilience in navigating the complexities of the global financial landscape underscores its robust financial strategies and adaptive approach to market dynamics, positioning it as a pivotal entity in Azerbaijan's economic framework.