A $10 increase in oil prices improves Azerbaijan’s current account balance by approximately $1.2 billion, while a $50 increase in the price of 1,000 cubic meters of natural gas adds a further $900 million in positive impact.
Taleh Kazimov, Chairman of the Central Bank of Azerbaijan (CBA), provided these estimates in an interview with Global Finance magazine.
According to Kazimov, changes in energy prices affect the economy through foreign trade, imported inflation, and the valuation of strategic assets. Although these channels have different effects, the overall impact remains positive for Azerbaijan.
However, approximately 80% of Azerbaijan’s non-energy imports come from economies that import energy. According to Kazimov’s estimates, a 10% increase in oil prices raises inflation in Azerbaijan’s trading partners by approximately 0.67%. Consequently, higher energy prices improve Azerbaijan’s external balance while also creating price pressures through imported goods.
From an economic perspective, these two effects can occur simultaneously. An energy exporter benefits from more favourable selling prices, while businesses importing goods from abroad may face higher production and transportation costs. The extent to which these additional costs are passed on to domestic consumers depends on contractual arrangements, competition, inventories, and exchange rate movements.
Kazimov identified exchange rate stability as a cornerstone of monetary policy. Other key instruments include the interest rate corridor, which helps transmit monetary policy decisions through the economy, and the protection provided by the country’s reserves.
According to the figures he presented, Azerbaijan’s strategic reserves stood at $85.8 billion at the end of June, exceeding 125% of gross domestic product (GDP).
The estimated positive impacts of $1.2 billion and $900 million should not be interpreted as additional funds that will flow directly into the state budget.