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CBA to continue ensuring manat’s stability

27 September 2016 12:55 (UTC+04:00)
CBA to continue ensuring manat’s stability

By Nigar Abbasova

Financial sector in Azerbaijan have been seriously affected by different unfavorable processes, including influence of low and fluctuating prices in the oil market, double devaluation of the national currency and deteriorated macroeconomic indicators.

The country is currently engaged in reviewing its economic plans and taking measures to overcome the difficulties and challenges in the financial sphere.

The head of the Central Bank of Azerbaijan (CBA) Elman Rustamov told reporters that the CBA and other relevant structures will continue to ensure the stability in the exchange rate of the national currency (the manat).

He said that manat’s exchange rate has decreased only by 5 percent in nine months, adding that it is difficult to predict the future exchange rate of the manat, since it depends on many factors, including oil prices and balance of payments.

The head of the bank said that one of the main objectives is to adjust the rate of inflation to the level, which is acceptable for business, population and the state.

“High rate of inflation and devaluation of the national currency are bad for the economy. The rate of inflation currently stands at 11 percent, but it is hard to forecast the level, which will be reached by the end of the year,” he said.

He mentioned that the level of inflation will mainly depend on the stability of exchange rate.

“We keep the situation under control, despite the fact that it is constrained. We have managed to eliminate certain problems, which occurred in the monetary market, including shortage in currency. But our main objective is to ensure fundamental stability in the market,” he clarified.

CBA switched to a floating rate of the manat and abandoned its dollar peg thus allowing the currency to tumble by almost a third, following intensifying external economic shocks. The decision was taken due to the necessity to bring the currency market and the exchange rate of the manat into line with oil prices.

The country has already taken certain steps to bolster the resilience of financial sector and deter the level of inflation in the country.

Closure of non-viable banks and increase of interest rate on manat deposits, which is considered to be one of the most effective ways to stop the dollarization in the banking sector, are among the measures. Moreover, the country is intended to decrease the volume of import operations.

Exchange rate regime applied in Azerbaijan stipulates that the USD rate depends on demand-supply ratio in the currency market. The country applies four percent margin in the definition of the exchange rate of the manat against foreign currencies. The margin allows banks to realize their means with an income of 4 percent, suppress speculations in the market and prevent groundless increase of rate in exchange offices of the country.

Experts say that one of the main objectives of the economy is to reach a balance between the inflow and outflow of foreign currency. CBA is watching the processes that occur in the market and implements interventions should any necessity appears.

The official exchange rate of the US dollar and euro to Azerbaijani manat was set at 1.6292 manats and 1.8320 manats, respectively, on September 27.

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Nigar Abbasova is AzerNews’ staff journalist, follow her on Twitter: @nigyar_abbasova

Follow us on Twitter @AzerNewsAz

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