When will the manat learn to “float”?

Baku/21.01.22/Turan: In recent days, the possibility of switching the manat to a floating rate has been discussed in the media and social networks.

In an interview with local TV channels last week, President Ilham Aliyev touched upon steps taken earlier to keep the rate of manat stable. He said that the CBA (Central Bank of Azerbaijan) failed to keep the manat stable and that we lost $10 billion. CBA Chairman Elman Rustamov, answering journalists' questions at a briefing on the results of 2021, said: "We cannot keep the manat afloat by force, it is impossible to regulate the manat exchange rate administratively." A member of the Parliamentary Committee on Economic Policy, Industry and Entrepreneurship Vahid Ahmedov said that eventually the manat will be transferred to a floating exchange rate regime. What awaits the economy and the people of Azerbaijan if the manat fully switches to a floating rate? Will it be devalued?

A specialist in banking and finance, lawyer Akram Hasanov answered these questions in the “Difficult Question” program.

According to him, in the current situation, this should not be expected. “Of course, I agree that sooner or later we will have to switch manat to a floating rate. But I don't think it will happen this year,” he said.

According to the expert, in fact, the most optimal year for the transition to a floating exchange rate was 2017, when the world market was stable. But, the CBA, remaining true to its conservative policy, kept the manat exchange rate at 1.7 (against the US dollar). Then, starting in 2020, the COVID-19 pandemic began to interfere with this.

“In April 2020, the resignation of Elman Rustamov was expected, but  pandemic created such  conditions that  he  remained in his post. Because when there is uncertainty, then everyone remembers the devaluation. When oil prices fell again in April 2020, Elman Rustamov, who, as you know, is the barometer of our financial system, remained in his post. It means that devaluation is inevitable;  that's why he was left in office. That's when they say goodbye to him, then the manat will have a floating rate,” Hasanov said.

According to the expert, everyone should understand that sooner or later the rate of the manat will be floating, but, it won't happen now.

“Today the government is doing everything in its power to prevent devaluation. And this is right, because the rise in prices that began last year created a tense socio-economic situation in the country. Its aggravation by devaluation will not lead to anything good,” he explained.

Hasanov recalled that in 2015 there was a devaluation, but then the government, on the contrary, tried to prevent price increases.

“Then the rise in prices seemed inevitable. There was a devaluation and the prices of goods coming from abroad should have automatically increased. But that did not happen. Thanks to ... monopoly! Even before the devaluation, the monopolists raised the bar of prices so high that the government gave an administrative order - "Do not raise prices!",  says Hasanov.

According to him, now the situation is diametrically opposite - prices have jumped, and it is difficult to carry out devaluation; but the government is doing its best. The country has implicitly introduced a limit on the sale of foreign currency (dollars) to the population. This was done in order to force entrepreneurs to turn to the services of the "black market" (shadow market), where the dollar is more expensive. The trick is that in our country the shadow market is “protected” by the same big officials.

“Thus, they force entrepreneurs to raise prices. In this way, they are trying to prevent devaluation,” Hasanov concluded.--0--