Samir Aliyev: ‘If There Is No Force Majeure, Then Sharp Devaluation Should Not Be Expected for 1-2 Months’

Baku / 23.09.2016 / Turan: The government takes certain steps to limit the currency outflow from the country, one of which is restriction of imports by state-run organizations, the economist Samir Aliyev said.

In an interview with Turan the economist pointed out that the move is aimed at reducing the demand for currency in the domestic market.

‘The recently observed deficit in foreign currency showed that demand exceeds supply. The major interventions of the Central Bank and the State Oil Fund in the currency market and the purchase of 60-70 million dollars by banks shows the excess of demand over standard supply, which until then was typically $ 50 million.’  

Note that the standard offer of SOFAZ in the ForEx market is 50 million dollars. However, in September due to a shortage of currency, SOFAZ started to bring to the market the amount far in excess of this amount. On September 8, the State Oil Fund and the Central Bank offered $ 300 million, and on September 20 and 22 they offered 150 million USD.

The economist reminded that the monthly demand for the currency in Azerbaijan is about 1-1.2 billion dollars.

‘I think the government will try to keep the exchange rate of the manat, but with the approach of the end of the year, the pressure on the national currency will increase. This is due both to the performance of external liabilities of companies and banks, as well as the execution of the country's budget. In fact the devaluation of December 21, 2015 was mainly associated with the failure of the state budget,’ he said.

According to him, the government will try to pursue a policy of a soft devaluation and if there is no force majeure, sharp devaluation is not expected within 1-2 months.

‘Even if at the end of the year there is a decision on a sharp devaluation, it will not be 35-48% devaluation as it was in past times. I expect that in the event of devaluation it will be between 10 and 20%. In general, I predict that by the end of the year the manat exchange rate will be established at the level of 1 USD / 1.80AZN,’ Aliyev said.

After the rise of the dollar to 1.6403 manats on September 9, the government strengthened AZN slightly through intervention in the foreign exchange market.

On September 23 the official rate of the manat was at the 1 USD / 1.6292AZN level.

Note that after the second devaluation, the highest rate was recorded on March 11, 2016 – 1 USD / 1.6456AZN, and the lowest rate was on May 26 – 1 USD / 1.4900AZN.  ----71B