Within two days, the Ministry of Finance of Azerbaijan has issued government bonds at a substantial sum: the day before, government-guaranteed securities in the amount of 500 million dollars were issued, today 1.5 million short-term bonds and 2.5 million medium-term bonds of 100 manats each (in other words, on a total amount of 400 million manat) were issued. Economists Farhad Amirbekov and Ilaha Mammadli told Vestnik Kavkaza about the reasons for such an active output from the state on the Azerbaijani securities market.
For example, financial expert Farhad Amirbekov explained that in this way an alternative to bank deposits is being created. "It is no secret that over the past year there has been significant outflow of deposits of individuals from the banking system. The structure changed against the background of devaluation, demand for the dollar increased, and there was a pretty big outflow from the manat. There was a very large imbalance in the currency structure, the dollarization of monetary circulation of the economy has increased by more than 70%. In fact, by proposing such an instrument as government bonds to the internal market, the state compensates for the mistrust of depositors in the banking system and attempts to restore the normal circulation of money," he said.
Amirbekov pointed out the reason for the support of the financial markets, focused on actual individuals. "Bonds are offered primarily to the population, because there was a credit tightening of the banking system. The rate of lending to the economy as a whole decreased very much, so now only the population has real liquid assets," he stated.
The deputy editor-in-chief of 'Trend' on the economy, Ilaha Mammadli, also explained the issue of bonds was due to the reaction of the financial institutions of the republic to the current situation. "After the devaluation of the manat, we observe the hype, people are trying to buy dollars without waiting for the next wave, they are even willing to exchange their last manats, hoping to gain something in the future. In connection with this, the state is taking measures to support both the banking sector and the population. That is, issuing bonds has two goals, that is why they are issued both in manats and dollars," she informed.
"The main purpose of manat bonds is so that people do not exchange their manats and receive certain income by investing in government securities. Bonds will be placed on the stock market with state guarantees, given the fact that the issuer is the Ministry of Finance. It is profitable to invest in them, the profitability is 11-12%, higher than inflation, so that the population would not lose its income. The dollar bonds profitability is only 3%, in order not to allow an outflow of the banking sector: as long as their profitability is lower than that of the deposits in US dollars, foreign currency remains in deposits and banks have the opportunity to continue earning," Ilaha Mammadli stated, concluding that in this way confidence in the manat will increase, incomes of the population will increase, and the turnover of the stock market will also increase.
