Financial Analysts on Third Wave of AZN Devaluation

The World Bank analysts believe the high probability of the third wave of devaluation of the manat.

As stated in the report about the expectations for this year (Global Economic Prospects), oil exporters (Azerbaijan, Russia and Kazakhstan listed) have suffered from significant oil revenues fall, even despite the presence of reserve funds and the relatively low level of public debt, secured in a period of high prices on hydrocarbons. All three countries have revised their budgets based on lower average exchange rates (their budgets will not lose even at the level of $ 41 or more per barrel).

However, in particular, Azerbaijan, where the public finance was in surplus for many years with solid assets of the State Oil Fund, has problems in balancing fiscal consolidation and stimulating. So, perhaps, it will have to devalue the national currency once more in order to stop the fiscal deterioration in the medium term.

Low oil prices will provoke a weakening of the current account balance and the reduction of foreign exchange reserves, and will put pressure on the exchange rate of the manat to the US dollar.

"Key priorities in these countries include adjustments to the decreasing level of government revenues and risk management of the financial sector in the context of reducing the fiscal space for potential measures to stabilize this sector," the report said about the expectations. --17D-