Don’t Be Fooled By Strengthened Manat, Economist

When on February 1 of this year the official exchange rate of the Central Bank of Azerbaijan reached 1.92 manat to the dollar, many were sure that the dollar would continue to appreciate.

When on February 1 of this year the official exchange rate of the Central Bank of Azerbaijan reached 1.92 manat to the dollar, many were sure that the dollar would continue to appreciate.

However, since April 7, the exchange rate of the national currency appreciated to the level of 1.7031 manat to the dollar, or 12.7% less in comparison with February of this year.

What can explain this turn of events?

Economist Akram Hasanov says that the exchange rate of the Azerbaijani manat depends primarily on the price of oil, and depends little on the supply of manat in the country.

Hasanov says it is unlikely the price of oil will reach 60 dollars per barrel. Additionally, “the Central Bank of Azerbaijan, in the end, will be forced to increase the supply of manat. Naturally, all this will lead to a fall in the exchange rate of the manat; the national currency is doomed to depreciate”.

Speaking of the supply of manat, the expert added that its volume has already fallen by 50% relative to preceding years:

“This was done so that the exchange rate of the national currency wouldn’t fall irreparably. The present supply of manat at less-than-necessary volumes has led to a ‘paralysis’ of the payment system. The present growth in the exchange rate of that manat is an artificial process. The Central Bank, by reducing the volume of manat, is trying to buy up dollars from the population at a cheap price, and in this way is strengthening its currency reserves. And it’s worked, since in recent months their reserves have increased”, he explained.

According to the Central Bank’s statistical bulletin, the average exchange rate for the manat relative to the US dollar was one dollar to 1.5959 manat in 2016 compared to 1.0261 manat in 2015, to 0.7844 manat in 2014 and to 0.7845 manat in 2013.

Ana səhifəNewsDon’t Be Fooled By Strengthened Manat, Economist