Azerbaijan's CBA May Buy $1B In Foreign Currency By Year-End

(MENAFN- Trend News Agency) BAKU, Azerbaijan, October 29. The Central Bank of Azerbaijan (CBA) may conduct foreign currency purchases worth approximately $1 billion by the end of this year, governor of the Central Bank of Azerbaijan (CBA) Taleh Kazimov said, Trend 's correspondent reports from the event.

He made the remarks at a press conference on Thursday following a meeting on the parameters of the interest rate corridor.

Kazimov noted that the bank has no specific target for the size of its foreign exchange reserves or a fixed limit for its currency purchases.

According to him, the Central Bank makes its decisions based on market conditions and the potential inflationary impact of money issuance, regardless of the level of its foreign exchange reserves.

“We have no target requiring our reserves to reach a certain level before we stop purchasing foreign currency. We expect to continue our buying interventions through the end of the year, including over the remaining two months. We may purchase around $1 billion, but we have no target to stop at a specific amount,” he said.

The CBA governor also addressed measures to increase activity in the interbank money market. According to him, banks previously preferred to keep their available funds with the Central Bank rather than place them with other banks.

“Our goal is for banks to direct their available funds to one another more often instead of placing them with the Central Bank. Where there is demand, placing funds in the interbank market can also support lending,” Kazimov said.

He emphasized that, under the decision adopted on September 23, the interest rate paid by the Central Bank on funds attracted from banks was reduced to 5%. This made transactions with other banks more attractive than placing funds with the CBA.

“All banks participate in the interbank market. However, each bank has its own liquidity needs: one may have excess funds, while another may have less available liquidity. Banks can participate both in the Central Bank's operations and in the interbank market,” he added.

Commenting on the potential inflationary impact of manat issuance resulting from foreign currency purchases, Kazimov said the Central Bank had purchased $3.6 billion this year and issued an equivalent amount in manats. However, the funds issued do not have an immediate, direct impact on the economy.

“If these funds were put to use in the economy immediately, they could accelerate inflation. We are not seeing that under current conditions,” Kazimov noted.

According to him, lending is one of the main channels through which money issuance affects the economy. When demand for loans increases, banks can channel their available funds into the economy through lending. Therefore, the Central Bank assesses the potential inflationary impact every time it issues manats.

“We currently have no specific limit on foreign currency purchases. Every time we issue manats, we seek to assess the impact on inflation. If there is no inflation risk, we continue purchasing foreign currency,” the CBA governor said.

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