Constitutional Court: Loans Taken in Foreign Currency before Devaluation Should Be Returned at Current Rate
Azerbaijan's Constitutional Court ruled that credits taken by legal entities and individuals in foreign currency until 21 February 2015, i.e. before the devaluation of the manat, are to be returned at the rate applicable at the time of repayment. Thus, the Court canceled out the borrowers’ hope for the return of loans at the rate at the time of receipt.
The only soothing pill for borrowers was a recommendation of the Court to banks to possibly extend the return dates of the loans.
The Court’s decision on credits in foreign currency was announced on May 14, but it was not published on the website of the Court.
As you know, on February 21 the Central Bank of Azerbaijan established the exchange rate of the manat to the US dollar at 1.05 manat, and thus by this administrative decision the manat fell against the dollar by 33.5% in a day.
On the eve of the “black” date the President, the Chairman of the Central Bank, and other officials urged citizens and foreign investors about the stability and firmness of the manat.
In reality, people that received loans in dollars suffered serious losses attributable to the state, as they will have to pay the bank extra 33.5% of the amount received. At the time of the devaluation the exchange rate was 0.7862 AZN / $ 1. In 2014, loans in foreign currency in the amount of 5.037 billion manat were given in Azerbaijan. -0-
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