Residents of Azerbaijan may have to pay off more credit than bargained for

Azerbaijan’s constitutional court has decided not to take the devaluation of the manat into account

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The Constitutional Court of Azerbaijan has delivered a verdict concerning a disagreement between borrowers and banks on how to pay off dollar-denominated loans – according to the old exchange rate or the new one.

The Court verdict stated that the public will be obliged to pay off their original dollar-denominated sums, which are now double what they originally were during the time period in question.

Since 2015, the Azerbaijani manat has lost almost 200 per cent of its original value against the dollar. Thus, those that took out dollar-denominated loans before the devaluation, when the dollar was even cheaper than the manat (0.78 AZN to 1 USD), will now be forced to pay twice as much as they originally intended to. The current exchange rate is 1.70 AZN to 1 USD.

Borrowers claimed it would be fair for them to continue paying off debt according to the old exchange rate, though the banks did not agree. The case thus made its way to the Constitutional Court. Banks also asked the court to clarify Article 422 of the Civil Code of Azerbaijan, which states that loan conditions may be amended if the country faces substantial changes.

“Is it possible to consider the devaluation of the national currency as a significant change in the situation regarding loan debt?” the banks asked. The court responded: “No, the devaluation of the national currency is not a significant change in this regard.” The court stated that a borrower should be aware of the risks he or she takes when requesting a loan denominated in a foreign currency.

Data from the Central Bank of Azerbaijan


that, at the beginning of this year, the amount of overdue loans was almost 1.700 million manat (USD 1 billion). As of now, this amount has increased by 4.25 per cent. The share of problem loans in the total loan portfolio of banks is now 14.5 per cent.

The head of the Centre for Economic and Social Development, Vuqar Bayramov, says that 2.5 million citizens have bank debt, approximately one fourth of the country’s population.

The manat’s devaluation and the hike in debt has affected many people, and has even resulted in tragedy in some cases.

A resident of a Baku suburb told JAMNews:

“My relative hung himself when he realised that he would not be able to repay the debt. Now he’s gone, and his family has to pay the debt for him. Every month, his widow gives 100 dollars to the bank. And it will go on like this for another seven years.”

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