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Central Bank of Azerbaijan created additional liquidity of AZN 247 million in the first quarter

16 June 2009 12:41 (UTC +04:00)

Baku. Vahab Rzayev - APA-Economics. In accordance with the monetary policy for 2009, the Central Bank of Azerbaijan pursued a monetary and exchange policy at achieving macroeconomic equilibrium and financial stability of the banking system during the first quarter.

The central bank said in a statement that under the psychological influence of devaluation in neighboring states, the demand for the US dollar increased in the first quarter.

Thanks to the timely control of the market, the exchange rate of the manat was kept stable and the manat dropped only 0.2% in price versus the dollar.

The nominal effective rate increased by 7.9% in the first quarter, contributing to the decline of average annual inflation to single digits. The real effective rate strengthened by 4.2%.

According to the report, softening monetary policy since late 2008 in order to minimize the impact of global crisis on the national economy was maintained in the first quarter.
The refinancing rate was reduced from 8% to 3%, the interest corridor ceiling was cut from 13% to 8% and the mandatory reserve requirement was slashed from 6% to 0.5% during January-March.

As a result, the central bank managed to provide additional liquidity of 247 million manats in the banking sector.

The balance of liquidity became positive (surplus) for the first time in recent years, indicating that cashflows (refinancing, reverse repo) into the banking system exceeded withdrawals of liquidity (notes portfolio, repo, mandatory reserve) from the market.

At the same time, manat money base increased by 14%, manat board money rose by 7.1% and money supply to non-oil GDP ratio reached 31%.