MP: Devaluation is not expected in 2024

Despite a significant surge in demand for the US dollar in Azerbaijan, leading to concerns about the stability of the manat, the member of parliament has reassured citizens that no devaluation is expected in 2024.

According to data from the Central Bank of Azerbaijan, from January to May 2024, 37 foreign exchange auctions resulted in the sale of $2.968 billion to banks—double the amount sold during the same period last year. The sharp increase in dollar demand has been particularly pronounced in the first quarter, with individuals acquiring $931.3 million from banks, reflecting a year-on-year rise of 112%.

Initially, the Central Bank attributed the heightened currency demand to seasonal factors, linked to government projects and private sector import demands, especially for food and agricultural products. However, the persistence of this "seasonal" demand has raised questions about the underlying causes.

Mazahir Efendiyev, a member of the Milli Majlis' Committee on Economic Policy, Industry, and Entrepreneurship, addressed these concerns, emphasizing the role of recent reforms at the National Bank. "In the last summer and autumn sessions of Parliament, new legislative initiatives were introduced to enable the National Bank to implement monetary policy independently," Efendiyev told Turan. He noted that Azerbaijan's expanding and diversifying economy, along with increased international interest and trade turnover, has contributed to the rising dollar demand.

Fellow committee member Vahid Ahmadov highlighted recent rumors about a potential devaluation of the manat, which have caused public anxiety. "I have repeatedly stated that devaluation is not expected in 2024," Ahmadov asserted. He explained that the increase in dollar demand is partly due to people converting their manat holdings to dollars and an uptick in imports, which necessitate foreign currency.

Economist Natig Jafarli shared additional considerations with Radio Azadlig, citing both objective and subjective reasons for the increased demand. He pointed to the summer travel season, preparations for the upcoming school year, and large-scale repair and construction projects in Karabakh and East Zangazur as key drivers. Jafarli predicts that while the demand for foreign currency might ease slightly in September-October, it will likely rise again towards the end of the year due to holiday-related spending.

Jafarli also highlighted a communication gap between state bodies and the public, which has fueled speculation and rumors. "I do not anticipate any exchange rate changes this year, but this stability might not last indefinitely. Mitigating measures for the manat's exchange rate might be necessary by mid to late next year," he added.

Azerbaijan experienced two significant devaluations in 2015, which saw the manat's value against the US dollar more than halve. Although the country announced a transition to a "floating exchange rate" regime that year, the manat's exchange rate has remained stable since spring 2017. Experts suggest this stability reflects the government's reluctance to fully embrace a floating exchange rate system.