BAKU, Azerbaijan, October 29. The Central Bank
of Azerbaijan (CBA) has no specific target or limit for increasing
its foreign exchange reserves, 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 when intervening in the foreign exchange
market, the bank assesses the potential impact of its foreign
currency purchases on manat issuance and inflation before making
decisions.
According to him, the Central Bank expects to continue
purchasing foreign currency in the market through the end of this
year. Purchases could amount to approximately $1 billion by
year-end.
“We have no target requiring our foreign exchange reserves to
reach a certain level, after which we would stop purchasing
currency. We expect our buying interventions to continue through
the end of the year. We may purchase approximately $1 billion,”
Kazimov said.
The CBA governor also addressed the functioning of the interbank
money market. He said one of the Central Bank’s main objectives is
to encourage banks to place their available funds with one another
and increase activity in the interbank market.
According to him, banks previously preferred to place their
excess funds with the Central Bank rather than with other banks.
Following the decision adopted on September 23, the interest rate
paid by the CBA on funds attracted from banks was lowered to 5%,
making interbank transactions more attractive.
“Our goal is for banks to place their available funds with one
another more often rather than depositing them with the Central
Bank. Naturally, if there is demand for loans, banks can also
direct their funds toward lending instead of keeping them with the
Central Bank,” he emphasized.
Kazimov noted that all banks can participate in the interbank
market. However, each bank has different liquidity needs: some have
more available funds, while others have less.
Asked about the impact of increasing foreign exchange reserves
on the economy and inflation, the CBA governor said the Central
Bank had purchased $3.6 billion worth of foreign currency this
year, issuing manats in return.
“However, these manat funds do not have a direct impact on the
economy because they exist in various forms. If these funds were
immediately put to use in the economy, they could accelerate
inflation. We are not observing that at present,” Kazimov said.
According to him, one of the main channels through which
additional manat liquidity could affect inflation is lending.
Growth in lending, in turn, depends on the level of demand in the
economy.
“We have no target or limit requiring us to stop increasing
foreign exchange reserves once they reach a certain figure.
Whenever we issue additional manats, we assess the potential impact
on inflation. If we see no risks, we continue purchasing foreign
currency,” the CBA governor added.
