Chairman of the Whole Azerbaijan Popular Front Party, MP Gudrat Hasanguliyev, said at a meeting of the Milli Majlis on December 11 that keeping the funds of the State Oil Fund of the Republic of Azerbaijan (SOFAZ) abroad affects the confidence of citizens in local banks.
"Part of the funds in the State Oil Fund should be kept in banks. The state keeps its funds in foreign banks and does not trust local banks. In this case, why should a citizen trust local banks?” the MP said.
Fakt Yoxla examined whether Gudrat Hasanguliyev's claim was true.
As of January 1, 2020, SOFAZ's assets amounted to $ 43.3 billion.
68.7% of these assets are held in the form of fixed income securities, 14.1% in shares, 11.4% in gold, and 5.8% in real estate.
SOFAZ prefers securities because it considers it risky to keep funds in bank accounts.
The Fund's assets on fixed income securities amounted to $ 29.8 billion. About $ 1.5 billion (5%) of these funds are held in the form of deposits and cash.
|
State Oil Fund of the Republic of Azerbaijan Distribution of portfolio of fixed income securities 2019 |
|
| Securities | Share |
| Corporate bonds | 26.4% |
| Sovereign debt securities | 24.5% |
| Financial bonds | 23.4% |
| Agencies and international organizations | 18.4% |
| Deposits and cash | 5.0% |
| Short-term commercial securities | 2.3% |
The portfolio of fixed-income securities of the SOFAZ uses 1.4 billion AZN of deposits and cash as money market funds.
Investments in money market funds consist of shares paid on demand of these funds. These funds invest their assets in short-term debt and debt-related instruments - commercial securities, certificates of deposit, floating-rate bonds, US Treasury bonds, Eurobonds, and asset-backed securities.
As of January 1, SOFAZ kept 1.2 billion AZN in bank accounts. This was equal to 2.5% of the Fund's total assets. 99.91% of these funds are kept in foreign banks and 0.09% in local banks. Accounts in all other foreign currencies except manat were opened in foreign banks.
The Fund's assets in local currency are held in the International Bank and the Central Bank. As of December 31, 2019, these bank accounts had funds in the amount of 71,000 AZN and 972,000 AZN, respectively. Last year, these figures amounted to 112,000 AZN and 820,000 AZN.
|
State Oil Fund of the Republic of Azerbaijan Distribution of funds held in bank accounts 2019 |
||
| Currency | Thousand manats | Share |
| Azerbaijani manat | 1,010 | 0.08% |
| USD | 694,638 | 59.8% |
| British pound sterling | 67,599 | 5.80% |
| Chinese yuan | 1,349 | 0.11% |
| Swiss franc | 1,946 | 0.17% |
| Australian dollar | 2,108 | 0.18% |
| Euro | 340,082 | 29.30% |
| Russian ruble | 398 | 0.03% |
| South Korean won | 1,476 | 0.13% |
| Canadian dollar | 822 | 0.07% |
| Hong Kong dollar | 435 | 0.04% |
| Norwegian krone | 406 | 0.04% |
| Danish krone | 208 | 0.02% |
| New Zealand dollar | 143 | 0.01% |
| Japanese yen | 43,175 | 3.72% |
| Singapore dollar | 220 | 0.19% |
| Swedish krone | 75 | 0.07% |
| Israeli shekel | 93 | 0.08% |
| Turkish lira | 4,434 | 0.38% |
| Total | 1,160,617 | 100% |
The President's decree on SOFAZ's budget for 2019 states that 90% of the Fund's assets can be expressed in the currencies of countries where the credit rating issued by international credit agencies is not lower than "A" (Standard & Poor's, Fitch) or "A2" (Moody's).
Azerbaijan's credit rating approved by these agencies is BB+ and Ba2, respectively. This factor limits the Fund's ability to carry out wider investment activities in manat.
Thus, SOFAZ, which has $ 43.3 billion in assets as of January 1, 2020, does not prefer to invest in bank accounts due to risk factors. The funds held in these accounts amounted to 1.2 billion AZN, or 2.5% of the Fund's total assets, of which 99.91% fell to foreign banks and 0.09% to local banks.
Fakt Yoxla concludes that Gudrat Hasanguliyev's claim is True.
