CESD Chairman: Azerbaijan national currency will continue depreciating against the dollar

CESD Chairman: Azerbaijan national currency will continue depreciating against the dollar

In the coming months, the devaluation of the manat will continue, the economist Vugar Bayramov said. In an interview with Turan Bayramov noted that AZN has not found its real exchange rate. Note that in the last two months the dollar in respect to manat has been growing. If on July 1, 2016, the dollar was worth an average of 1.56 manats, in August there is a daily growth of the dollar. Record high exchange rate of the dollar against the manat after the second devaluation was established on March 11, 2016 – 1USD / 1.6456AZN. The lowest rate of the dollar was on 25-26 May 2016. In those days, manat strengthened to 1USD / 1.49 AZN level.

Bayramov, touching the permanent growth of the dollar against the manat, noted that there are several reasons. ‘The decline of foreign currency reserves of the Central Bank to a critical level limits the possibility of intervention. As a result, the last two months need for currency has not been fully satisfied, which in turn increases the pressure on the national currency. In March and July 2016 the Central Bank intervened only once in the market in the amount of $ 100 million,’ the expert believes. As another reason the expert points to a negative balance in the foreign trade balance of the country. In the first six months of 2016 the deficit amounted to 225.8 million dollars, while during the same period last years, Azerbaijan always had a positive balance in foreign trade turnover.

The expert also indicates increase in the weight of the national currency as reason for rise in price of the dollar. ‘On July 29 the volume of money supply in the national currency was 1.85 billion, or 24% more than in January.’ On the other hand, the expert said, the transition to a floating exchange rate has made the country’s population a participant in the foreign exchange market. ‘The population and businesses are now trying to capitalize on the changing value of the dollar against the manat,’ said Bayramov.

As another reason the expert sees the growth of Azerbaijan’s foreign public debt. ‘The foreign debt growth also causes increase in the cost of servicing this debt, causing growth in public demand in the foreign exchange market,’ the economist said. Bayramov reported the observed increase in foreign liabilities of commercial banks.
According to him, at the beginning of the year this indicator of banks totaled AZN 151.6 million. By the end of May it increased 7 times and amounted to 1 billion 26 million AZN. ‘It should be noted that this growth will increase the growth of demand in the currency of the commercial banks in the coming period,’ said the expert. The closure of some commercial banks and the payment of compensation to depositors of these banks are also among the reasons for the growth of the dollar.

According to him, the payment of deposits in manats increased demand for the currency market. ‘I believe the AZN rate in the coming period will mostly depend on oil prices. Unless there is a force majeure situation, sharp increase in oil prices in the years 2016-17 is not expected, which in turn means that the dollar will continue to grow,’ said Bayramov

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