Drop in Oil Prices below $ 50 Bad Call for Government

The fall of the price of Brent crude oil below $ 50 was an unpleasant and alarming news for the government of Azerbaijan.

In mid-July, the Chairman of the Central Bank of Azerbaijan Elman Rustamov admitted in an interview with AzTV a new devaluation of the manat is not a real threat, if the oil price does not drop below $ 50 and the economic stability of the partner countries continues.

But then he tried to reassure the TV viewers: "I do not see any problems with the rate of the manat to the end of the year and in the medium term, if the average oil price remains at $ 50 and there are no major developments in the economies of our trading partners."

This means that the current rate of the manat can resist the decline in oil revenues for at least a year and more at such a worse trend.

 Standard & Poors said that in 2015 the average oil price will be $ 55 per barrel and in 2016 it will be $ 65. Therefore it sees no reason for the devaluation of the manat. However, in such a situation the agency considers it necessary to increase institutional effectiveness and monetary flexibility, which is tied to the February devaluation of the manat, and, as a consequence, to the growing dollarization of the economy.

However, the agency does not rule out that the situation could worsen if the government fiscal efforts are insufficient or if the fall in prices is higher than expected. -0-