By Gulgiz Dadashova
Azerbaijan should consider a soft devaluation for its national currency, as the reserves of the Central Bank of Azerbaijan continue to decline.
Addressing the meeting on the 2016 draft state budget on October 2, MP Vahid Ahmadov said the CBA still controls the foreign exchange market and carries out interventions. Before the devaluation of the manat, the CBA reserves were at a level of 15 billion manats, but the current figure is little more than 7 billion manats.
“Given that the intervention negatively affects the CBA reserves, I think that the CBA needs to regulate the manat rate taking into account market prices. We can face serious problems in case of failure to take this step,” he said.
Since early 2015, the foreign exchange reserves owned by the Central Bank decreased by $6.714 billion (48.8 percent), according to CBA data revealed on October 2.
In September 2015, the Central Bank's foreign exchange reserves declined by $271.2 million (3.7 percent) to $7.044 billion.
A decline in the CBA foreign exchange reserves has been observed since July 2014. Earlier, this happened slowly (around $20-50 million), but it took a sharp turn (more than $1 billion monthly) starting in December as dollar demand rose in the country.
Later in May-June 2015, the growth of foreign exchange reserves had resumed. In May, the CBA reserves increased by $42.9 million (0.51 percent) from the April figure to reach $8.43 billion, and by $89.4 million (1.06 percent) in June. However, after slight growth, the reduction of foreign exchange reserves of the CBA continued.
Meanwhile, CBA Deputy Chairman Khagani Abdullayev said the Bank does not see a need for a sharp change in the manat rate against the USD in 2015 and 2016, citing stabilization in the demand for foreign currency on the domestic market.
He said the rate could be kept unchanged if oil prices do not change dramatically.
Recalling that in August, the foreign exchange market was under pressure as a result of the psychological impact of devaluation of national currencies of countries neighboring Azerbaijan, he said that since mid-September, a stable situation has established on the market.
“Currently, the Central Bank's foreign exchange reserves exceed $7 billion,” said Abdullayev. “We do not expect significant dollarization in the economy of the country, and today the main task of the CBA is to ensure safety of foreign exchange reserves and macroeconomic stability, which will ensure a stable exchange rate of manat.”
The CBA’s currency reserves decreased by $1.1861 billion (13.95 percent) to $7.3 billion in August, 2015.
Earlier Fitch Ratings announced that it does not expect a further devaluation of Azerbaijan’s national currency, the manat.
Dmitry Vasiliev, the director of the agency’s Financial Institutions, told Trend that contrary to Azerbaijan, other CIS countries have faced a deeper devaluation. However in the case of Azerbaijan, Fitch does not consider this as a baseline scenario.
“It is difficult to estimate the probability [of the repeated devaluation], but we can say that today, it is below 50 percent,” said Vasiliev.
The rate of the manat against the USD in the state budget for the next year is set at 1.05 manat.
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