Deficits are largely financed by ample assets accumulated in Sofaz. Despite a decline in the USD value of assets in 2015-2016, they accounted for a comfortable 92% of GDP at end-2016 (USD33.1bn), were largely held in safe, liquid assets, and were reported much more transparently than in most higher-rated oil producers. Government debt therefore remains contained, at 22.5% of GDP at end-2016, much lower than the `BB` median of 51.1%. Although public debt has an unfavourable currency composition (88.2% was denominated in foreign currency at end-2016), this is mitigated by the USD denomination of most Sofaz assets.
FX reserves fell to a historical low of USD3.9bn at end-2016 (2014: USD13.8bn), just covering three months of current account payments. In a move to preserve FX reserves and Sofaz assets, the central bank adopted a managed float regime in 2016, which it intends to convert into a free float in 2017. Ongoing volatility of the manat undermines confidence in the currency.
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