"Devaluation is inevitable"

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Question: As you know, the FRS (Federal Reserve System) has announced the next interest rate at the level of 0-0.25%. This became the reason for discussions about the future position of the manat. What will happen to manat  in such conditions?

Answer: In general, the influence of the dollar in the world is declining. It is curious that while the world is promoting the market model of the economy, in reality, determined in the interest rate of the US Federal Reserve, set in an administrative order, plays a decisive role for the world economy. Just like the State Planning Committee in the USSR. The only difference is that there is only one beneficiary country - the United States. However, this hegemony is gradually decreasing.

At the same time, the influence of the dollar for such small countries as Azerbaijan, which, moreover, does not have a diversified economy, is still great. Specifically, not the final decision itself, but the expectation of an increase in the interest rate several times next year, will lead to an increase in the dollar. Including for us.

But since our economy depends exclusively on oil prices, next year everything will depend on the price of this resource. And here economic factors are not decisive. Oil prices are more geopolitical. The confrontation between the West and Russia could bring down oil prices again. In this case, the fate of the manat may also be deplorable.

Question: Can the manat fall in price against the dollar in the near future or in the new year?

Answer: Everything will depend on the oil price. There is a global geopolitical tension. Against this background, anything can happen. Economic factors are not decisive.

Question: You said that the manat exchange rate also depends on the oil price. Could this threat lie in wait for the manat if oil prices fall?

Answer: It (the rate of the manat -  Ed.) primarily depends on oil prices. The likelihood of a reduction in price is quite high.

Question: One of the main topics on today's agenda is the rapid depreciation of the Turkish national currency. It also causes panic among the population of Azerbaijan. Do you think this situation can affect the manat?

Answer: The exchange rate of the Turkish lira does not have a serious negative impact on the manat. We do not trade in lira with Turkey. On the contrary, Turkish goods are getting cheaper for us. We compete with Turkey only on the Russian agricultural market. It may be that Turkish products will drop in price a little. But then again, I don't think this will have a significant negative impact on us.

Question: What impact does the fall of the Turkish lira have on the economy of Azerbaijan?

Answer: As I said, none. Is that as a psychological factor. It is he who is the cause of the panic.

Question: Is it necessary to maintain the manat rate? Or  let it go? What do you suggest?

Answer: The manat should have been released back in 2017. Then there was an auspicious moment. There was partial stability. Everyone believes that the rate of the manat will change. But then, the fixed course mode was selected again. Then there was a pandemic and a war. Currently, prices in the country are already rising. Letting go of the manat can cause serious social problems. Therefore, now the rate of the manat should be stable.

However, it should be understood that devaluation is inevitable. If oil prices are stable and even if they grow, our production will decrease. Meanwhile, the non-oil sector is developing poorly, since the country lacks a normal legal and investment climate. I have said more than once that Elman Rustamov, extremely unpopular and condemned by the people, is kept at the head of the Central Bank so that he can timely carry out another devaluation. He is our national devaluator. Most likely, after the next devaluation,  he will leave, and the manat will finally start to float. Ultimately, they will do what was not done in 2017. But when this will happen is difficult to say. Probably in the next 3 years. It would be nice if this does not happen next year. In the current conditions, the consequences of this can be very grave.

Kamran Mahmudov