Azerbaijan’s chief banker: I'm shocked people believe that a devaluation is possible

"I was asked today about a possible devaluation. This question really surprised meç because I am shocked that people continue to believe that a devaluation is possible,” said Elman Rustamov, the chairman of the Central Bank of Azerbaijan, in Baku on 19 September.

He said the Azerbaijani government does not see any particular risks for the manat’s exchange rate.

"The manat is currently on a floating exchange rate regime. A positive trend is usually formed due to a surplus in current transactions in the balance of payments. For example, as of today we expect the current account surplus to be about 1.5bn to 2bn dollars," Rustamov said.

Against a backdrop of these statements, we recall the statements Elman Rustamov had made prior to the first and second devaluations. For example, on 17 February 2015 - just four days before the devaluation, Elman Rustamov said in an interview with state-run AzTV that "there are no fundamental reasons or grounds for a chronic and prolonged weakening of the manat. There is no reason for concern. No dramatic devaluation of the manat is expected."

On 21 February, people in Azerbaijan experienced the first shock from the depreciation of the national currency, when instead of a soft devaluation promised by the leadership of the Central Bank of Azerbaijan (CBA), the manat lost a third of its value on that day, falling from 0.7862 to 1.05 manats per dollar.

On 25 September the same year, Elman Rustamov said in reply to a question about whether another devaluation of the manat was possible: "Everything is quiet in the currency market. There is no reason for concern today." At the very same time, the budget package for 2016 reflected the government's expectations regarding the manat’s exchange rate for the next four years: for example, the dollar was forecasted to cost 1.05 manats in the next four years and the euro 1.13 manats.

Three months later, on 21 December 2015, a dramatic decline in financial resources, caused by a continued drop in oil prices in world markets, forced the Central Bank to switch to a floating exchange rate for the manat, and the value of the latter fell down literally overnight from 1.0499 to 1.55 manats per dollar.

There are fears that people in this country, who were badly hit by two sharp devaluations in the course of one year, will interpret the statements by the chairman of the board of the Central Bank the other way round and will fear a third devaluation.

Overall, the two rounds of devaluation have caused the exchange rate of the national currency to drop from 0.7844 manats to 1.5624 manats per US dollar, causing the manat to lose half of its value.

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