Money Deficit to End with AZN Fall

The news about the shortage of manat in the country caused a slight shock in the society. Not so long ago it was impossible to find dollars in the country - because of the fall of the rate of the manat, and ordinary people tried to get rid of the bills that had lost their value and bought up the appreciated US currency. All the more strange is the statement of MP Ziyad Samedzadeh. The head of the Committee for Economic Policy, Industry and Entrepreneurship of the Milli Majlis stated about the deficit of the manat: “The country has a shortage of money, and this problem worries us greatly. We have to conduct monitoring, in addition, to carry out work to improve the banks. There is a cash deficit. In this regard, we receive many appeals. This is a very serious problem, we must seriously discuss this. If the monetary deficit is not eliminated, economic activity will not grow,” Samedzadeh noted.

“The reason for the manat deficit lies in the policy pursued by the Central Bank of Azerbaijan,” the economist Natig Jafarli told Turan. “Since late January, the Central Bank has been intensively trying to collect the manats in circulation. To do this, weekly auctions are held, which take manats out of circulation at high interest rates (approximately 14%) and help to collect them in their hands. In addition, if we look at the structure of budget expenditures, we will see that the funds allocated for budgetary expenditures have not yet fully circulated.

In Azerbaijan, there is a bad trend - budget spending is rising sharply in the fourth quarter of the year. In the first months of the year, very little money is spent from the budget on various projects and expenditures, and by the end of the year the spending rate of funds is growing. The goal of the Central Bank and the Ministry of Finance is to reduce the free manat weight and thereby reduce the need for dollars. However, with the reduction of the manat supply, economic activity is also declining.

We have repeatedly warned the authorities about this and it is good that the deputies understood this and sounded the alarm. The process of reduction of AZN money supply cannot last long. After a while the growth of AZN money supply will be inevitable, because economic activity has decreased, and the volume of exports in the last 2-3 months decreased by 17%. This is the result of a decline in economic activity and purchasing power, which is the reason for the reduction of jobs and a decrease in people's incomes.

I think that after a while the authorities will again increase the turnover of the manat and try to revive economic activity. As in the past year, by the end of the year, the spending of budget funds will grow and the turnover of AZN will increase. Thus, from the fall the process of the fall of the manat rate may accelerate. The authorities have a red line in the exchange rate policy. The lower limit is taken for 1.7 manat per dollar and for several weeks the manat rate has not dropped below 1.725. The upper limit is taken for 1.92, as we saw it in January. The Central Bank is trying to regulate the exchange rate of the manat according to this corridor. However, since the end of the year this upper limit may jump to 1.95 and manat will begin to fall. Economic activity can accelerate this process.” -0--