Weekly economic rehash: September 9th, 2016

While visiting a new agricultural facility in Azerbaijan’s Khachmaz province on September 8, the president of Azerbaijan, Ilham Aliyev,

commented on the country’s allegedly prosperous economy:


“All of our plans are working out. Azerbaijan is developing itself from all sides…This is our path, which has already proved itself: the experience of our country is studied not only in the region, but around the entire world!”

The situation on the ground, however, looks different, as banks and businesses in Azerbaijan scramble to identify an appropriate strategy to deal with the country’s failing economy.

With Azerbaijani demand for dollars still rising and the exchange rate for the manat still falling, several Azerbaijani banks completely suspended dollar sales as of September 8. Azerbaijanis were confronted with a similar situation in the beginning of 2016, when most Azerbaijani banks also temporarily ceased to sell the dollar for several days in a row. Then,

Azer-Turk Bank cited the reason

as “an exhaustion of the daily limit.”

Although such tactics are generally intended to stimulate trust in and encourage savings in the local currency,

Bloomberg reported on August 22nd

that similar tactics in late August resulted in a spike in the black market price of the manat by .08 qepik (.049 US cents).

Minval.az, on the other hand, reported that the

cap on dollar purchases at many of Baku’s commercial banks, such as Bank Respublika and Azer-Turk Bank, had been removed.

Atabank, one of Azerbaijan’s oldest corporate and retail banks


has also lifted its buying limit, but advises clients to call the bank’s hotline first, to find out which branches have enough dollars to sell.

On September 7, Reuters reported that their correspondents in Baku could purchase US dollars in only three of six banks visited. Those banks willing to sell had a cap of $100 per individual customer. The banks’ official cap, however, was $500.

The partial willingness of some banks to begin selling dollars again may be related to the

Central Bank of Azerbaijan’s auction of $300 millio

n on September 8, and the decision of the CBA to raise the

main interest rate from 9.5% to 15%

, which come into effect on September 16th.

The fact that banks have decided to go with various strategies for dealing with the rising dollar demand points to the banks’ relative autonomy. Rafa Abbasov, an official in the Financial Markets Supervisory Authority of Azerbaijan, told Bloomerg that, “The sale of foreign exchange is something banks themselves decide…we can’t interfere.”

But it is not only private citizens who want to buy the dollar. Azerbaijan’s state oil company, SOCAR, on September 9 announced sales of dollar-denominated corporate bonds for the first time in its 24 year history.  Bonds will be sold at $1,000 apiece starting on September 20, with a fixed interest rate of five percent. The sale will end on October 10.

A SOCAR spokesman told minval.az

that the main goal of these bond sales is to “diversify sources of financing, and additionally to present new investment opportunities to citizens.”

But some economic experts suggest that Azerbaijan’s economic vulnerability will not end until it has weaned itself off oil-and-gas dollars, and that this will not be an immediately obtainable goal.

In an interview with


, economic experts Zzer Mehdiyev and Oktay Ahverdiyev predicted, respectively, that it will take 10 or 20 years before the non-energy sector will be able to more firmly establish itself as a vital part of the country’s economy.

Another economist, Nemat Aliyev, told Turan that he predicts the currency exchange rate to fall to two manats per dollar within the next few months. That would amount to a 22-percent slide;

a decline inching closer to the manat’s massive 33.5-percent devaluation against the dollar in 2015


So far, matters haven’t reached that stage.

As of September 9, the rate stood at just over 1.64 manats to the dollar, a 2.5 percent decline from 1.60 a month ago. Economist Aliyev cited the lack of development in the non – oil sector as the main reason for this decrease. According to him, income tax revenue in 2016 so far has fallen by 22%, and Value Added Tax revenue by 35% in comparison with 2015, he noted.

So while President Aliyev claims that all is well in the Land of Fire, it would seem that citizens feel the hurt of burnt – through pockets…

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