April 26, 2019 / 12:02 PM / a month ago

UPDATE 1-Azerbaijan's cenbank cuts rate to 8.75 pct, cites higher oil prices

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BAKU, April 26 (Reuters) - Azerbaijan’s central bank cut its refinancing rate to 8.75 percent from 9 percent on Friday, citing an improved macroeconomic situation and higher global oil prices.

The bank also lowered its rate corridor by the same margin, nudging the lower boundary down to 6.75 percent and the upper boundary down to 10.75 percent, from 7 and 11 percent before, respectively.

“The central bank decided to cut the rate... due to the rising oil price on the world market as well as the observation of a low inflation rate and improved macroeconomic situation in the country,” governor Elman Rustamov told reporters.

He said the bank had kept its inflation forecast for 2019 at 2-6 percent.

Azerbaijan’s foreign currency reserves stood at $46.7 billion at the end of the first quarter, comprising $40.7 billion in assets of the state oil fund (SOFAZ) and the remainder in central bank reserves, Rustamov said.

The central bank increased its own reserves to $5.78 billion after purchasing $150 million at currency auctions, while SOFAZ sold $1.5 billion, he said.

The current oil price on the world market of around $65 per barrel “suits Azerbaijan perfectly since the price was set at $60 per barrel in the state budget”, Rustamov added.

The higher oil price and improved economic environment helped Azerbaijan’s economy to expand by three percent year-on-year in the first quarter of 2019, he said. Non-oil industry grew by 16 percent.

The economy of the ex-Soviet republic started to stabilise in 2017 after being hit by a slide in the price of oil, which with gas accounts for about 75 percent of state revenues and 45 percent of gross domestic product

The central bank is due to hold its next meeting on the refinancing rate on June 7. (Reporting by Nailia Bagirova; Writing by Andrey Kuzmin and Margarita Antidze; Editing by Maria Kiselyova and Gareth Jones)

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