OREANDA-NEWS. January 20, 2015. Certain media outlets have been disseminating various articles on changes to the volume of FX reserves of the Central Bank recently.

We hereby notify that FX reserves are primarily prescribed to implement the monetary and currency policy and maintain financial stability in the country. FX reserves of the Central Bank, being one of the critical drivers of macroeconomic stability, are the guarantor of exchange rate stability and a safety cushion to combat currency crises. Accordingly, the Central Bank makes purchase and sale interventions to the market to balance supply and demand.

To this effect, the Central Bank made purchase and sale interventions to the FX market in 2014. The Bank made USD 1 billion 270 million worth of purchase interventions over 11 months of 2014 to prevent sharp appreciation of the exchange rate of manat against the USD given prevalence of supply over demand in the FX market.

However, sharp depreciation of rouble in December due to the crisis in neighboring countries, especially in the Russian Federation, as well as considerable fluctuations of exchange rates of neighboring currencies, psychologically affected the Azerbaijani FX market. It led to demand for USD in mid-December 2014 and the Central Bank made USD 1 billion 127 million worth of cash and cashless interventions to the market to regulate the new standing of the market in harmony with its functions. Consequently, manat remained stable, the size of foreign exchange reserves grew net USD 143 million. Hence, flexible regulatory efforts yielded full stability in the FX market, and the Central Bank has already resumed the sale intervention mode.

However, central banks of Russia, as well as other neighboring countries failed to maintain stability of their currencies despite considerable currency sale interventions, resulting in severe devaluation of a number of national currencies against the USD. The Russian rouble depreciated 80%, kazakh tenge 19%, turkman manat 22%, belarusian rouble 17%, ukraine hryvnia 90%, and the Turkish lira 8%.

To note, international rating agencies newly found the Azerbaijani manat the most stable and reliable currency in the CIS and Eastern Europe and in resource-rich countries.

Statistic decline in total volume of foreign exchange reserves of the CBA stems from currency diversification related factors in line with the forex management strategy. FX reserves are managed through diversification to euro and British pound sterling along with USD to protect and ensure return on reserves in harmony with the Central Bank’s investment strategy. For that very reason, strong USD against the currencies in question naturally leads to variation of relative value of reserves due to revaluation in USD.

According to the Statement of the Central Bank on main directions of the monetary and financial stability policy the stable exchange rate of manat is the critical policy priority this year as well. The stable exchange rate will anchor macroeconomic stability in 2015.

Our Honorable President tasked the maintenance of the exchange rate stability of manat in the meeting of the Cabinet of Ministers dedicated to results of the socio-economic development in 2014 and upcoming objectives in 2015. The Central Bank will ensure compliance with these tasks utilizing all tools at its disposal.