Economists Skeptical about Statement Made by Elman Rustamov

The statement by the head of the Central Bank of Azerbaijan Elman Rustamov that in 2017 the country will start a full floating exchange rate has caused an ambiguous reaction of economists.

The economist Natig Jafarli told Turan that in the world there is no such a thing as a full or part-time floating exchange rate.

"In fact, there is no difference. His statement only means that the central bank will not offer its holdings to exchange auctions," he said.

According to him, in Azerbaijan, the national currency exchange rate will be determined by administrative means as it was until now. "For floating rate we do not have the institutional framework. This is required by the stock market and the currency market. For example, in Russia on average about 11 thousand companies offer dollars on the foreign exchange auction and the price is formed on the basis of supply and demand. And we have only two subjects - the State Oil Fund and the Central Bank, which offer the US currency," he said.

Jafarli noted that SOFAZ at each auction offers about 50 million dollars, while demand is 500-600 million dollars. This means that the rate of the national currency at one auction can depreciate by 20 times, but this does not happen, because we have the rate set by administrative means.

"The statement by Elman Rustamov may mean that in 2017 the rate of depreciation of the manat will be strengthened. However, the authorities will not agree to a sharp devaluation, as this process may finally bring down the banking sector, which is already going through this crisis," he said.

But another economist Samir Aliyev on his profile on Facebook, touching this matter, noted that in the near future Azerbaijan will be unable to move to a fully floating exchange rate, as the current state of the economy does not let any sector other than oil provide dollars to the country.

“As long as the level of economic dependence on oil remains high, free determination of the national currency will remain challenging. In other words, until you have strengthened other channels in the country to ensure the dollar supply, the transition to a fully free rate is impossible,” said Aliyev. ----71D