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By Trend

Rate of the Azerbaijani manat has adapted to world oil prices, which varied within the range of $45-55, said Elman Rustamov, head of the Central Bank of Azerbaijan (CBA).

Rustamov made the remarks Nov. 30 during discussions on the draft state budget and concept of social and economic development in 2017 and the following three years.

Discussions on the budget started Nov. 30 during the joint meeting of parliamentary committees on defense, security and fight against corruption, on economic policy, industry and entrepreneurship, on agrarian policy, on public unions and religious structures and on natural resources, energy and ecology.

Rustamov went on to say that Azerbaijan has enough financial resources and funds for forming its own economic policy regardless of oil prices.

“There won’t be return to the previous economic model, which was based on oil sector,” he noted.

“We have already entered the post-oil era. Even if oil prices increase, there is no way back – to the previous economic model,” added the CBA head.

The exchange rate of the Azerbaijani manat to the US dollar decreased by 10.9 percent since the beginning of 2016 and reached record low – 1.7318 AZN/USD on Nov. 30.

Rustamov further said that the deficit in Azerbaijan’s payment balance will amount to $5 billion in 2016.

Head of the CBA

Rustamov said the biggest part of deficit of Azerbaijan’s balance of payments, that is 88 to 90 percent, is associated with problems in the capital flow balance.

“It cannot be said that the balance of payments has been fully adapted to the new, lower oil prices,” Rustamov said.

The CBA head added that many problems are associated with the past and current debts.

“There are accumulated problems in the form of companies’ loans attracted under state guarantees, as well as external debts of the International Bank of Azerbaijan, and we have to repay all of them,” said Rustamov.

“In general, there is a problem with accumulated debts, which currently has a major impact on the market,” Rustamov noted. “On the other hand, we are implementing the giant international project, the Southern Gas Corridor, and Azerbaijan’s government has to use its own financial resources with regard to it. This all affects the component of the balance of payments relating to the capital flow balance.”

He said the exchange rate policy of Azerbaijan’s Central Bank is aimed to neutralize the impact of these problems on the current account balance.

The current account deficit of Azerbaijan's balance of payments amounted to $801.9 million in January-June 2016. The current account surplus of Azerbaijan's oil and gas sector stood at $2 billion in January-June 2016.

Rustamov said that the CBA hasn’t carried out intervention into money market since February 2016.

He said that currently, manat’s rate is regulated in accordance with principles of floating rate.

“Despite this, there is a policy to regulate the rate at a certain level in order to help manat to find its value. We can’t forecast what will happen to manat’s rate, if we completely stop regulating it,” noted the CBA head. “Our activities are aimed at increasing macroeconomic stability in 2017, stabilizing manat’s rate at a necessary level, stability of prices and reducing inflation.”

“After that, we will have enough opportunities to pass to the development,” he added.

The CBA switched to the floating rate of manat on December 21, 2015, as a result of which the exchange rate of dollar and euro increased by 47.6 percent and 47.9 percent and stood at 1.55 and 1.685 manats, respectively.

In late September 2016, the CBA, in order to ensure more flexible participation of banks in the money market, decided to introduce new mechanism of holding auctions on currency sale that allows banks to apply both for the purchase and sale of foreign currency.

Under a new mechanism, the official rate of manat is set, based on the weighted average rate in accordance with the transactions concluded with commercial banks in the interbank foreign exchange market and in auctions.

On the days when no auction is held, manat’s official rate against the US dollar will be set based on the weighted average rate formed in the currency market on the basis of the currency purchase and sale transactions between banks.

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