Does decline of oil price cause Azerbaijani national currency depreciation?

Does decline of oil price cause Azerbaijani national currency depreciation?

Azerbaijani national currency, manat, will keep a stable rate against US dollar in the short term, the chairman of the Center for Economic and Social Development (CESD), well-know economist Vugar Bayramov said. In the medium and long term, then, according to Bayramov, here is difficult to predict manat’s rate since It will depend on the world oil market.

“Despite the increasing of dollar’s pressure on manat due to the fall in oil price in the world market, the balance of payments surplus is still maintained. Azerbaijani export is 3 times more than its import. This means that Azerbaijan receives 3 times more dollar than the currency left the country each year”- said Bayramov.

According to experts, from an economic point of view, Central Bank of Azerbaijan would make the sterilization of dollar rather than of manat in order to prevent local currency’s hard appreciation. However, there are not only economic but also psychological and side effects of this topic.

“Psychological effects are associated with the world oil market, decline of oil price has been putting pressure on manat, said the expert. Side effects are also related to the oil price. Due to the decline of oil price, income from the country’s export has been declined and huge savings of both the government and households negative impacts on services, banking and other sectors. Besides that, there would be cost of Central Bank’s intervention in order to prevent manat’s depreciation against dollar in up-coming days”- said Vugar Bayramov.

“However, in a number of oil-producing countries devaluation of the national currency is used as the main tool of filling the budget deficit. Russia in this respect is a relevant example “, – said Bayramov.

Chairman of CESD believes that the shortest-term rate of manat to remain stable. “In this regard, there is no cause for concern. Manat rate against US dollar will be remain stable in the short term. Central Bank’s strategy on monetary policy for 2015 also underlines that national currency will be remain as a stable.

© CESD, 2014

Leave A Comment