By Aynur Karimova
Rumors about a further devaluation of the national currency, the manat, have confused the public and many people rushed to banks and foreign exchange offices to buy USD on the weekend in Azerbaijan.
Despite the official exchange rate of the US was set at 1.5540 manats by the Central Bank of Azerbaijan, some report that the US currency was sold at 2 manats on the black market on December 27.
The CBA, commenting on the issue, has called speculations about further devaluation of Azerbaijan’s national currency and increase of the exchange rate of the US dollar to two manats as groundless.
“In accordance with the floating rate of manat, its exchange rate is formed based on the fundamental factors determining the supply and demand ratio of the currency on the market,” the CBA told Trend.
The Central Bank said that it participates on the currency market in accordance with the floating rate of manat and currently, the demand of the currency market is covered by holding auctions.
The value of the manat dropped on December 21, following the CBA decision to allow a freely floating exchange rate. As a result, the US dollar and euro rose by nearly 50 percent in value in Azerbaijan, making the manat the world’s worst-performing currency this year.
The Azerbaijan Banks Association Executive Directorate also denied the rumors about abrupt changes in the exchange rate of manat.
"We inform that the abrupt changes in exchange rate of manat are not expected and recommend the population not to believe such rumors," the association reported.
The association told Trend that the liquidity of banks in foreign currency is sufficient and allows fully meeting customer demand for the currency. Thus, such rumors have no foundation and serve the interests of certain people.
Foreign currency debtors
The sharp devaluation of the manat has again actualized the problems with loans in foreign currency. Following the shift to “free” manat, the dollar-denominated debt of borrowers increased by almost 50 percent in terms of the manat.
To solve this issue, the government has submitted a proposal to help foreign currency debtors.
Zakir Nuriyev, the Head of the Azerbaijan Banks Association, told Trend that the proposal is to cover the difference arising in the result of banks’ recalculation of payments on foreign currency loans in accordance with the new rate of Azerbaijani manat at the expense of funds of the CBA.
“Namely these funds were planned to be allocated to cover the difference arising at borrowers of foreign currency loans,” Nuriyev said. “The association welcomes this decision. In such cases, the main problem is to determine the source of compensation to the population, so as not to burden the state budget by additional costs. But if there is such a source [the Central Bank of Azerbaijan], I think the government should use it. After that, banks can resort to restructuring of loans - increase the maturity of loans, lower interest rates, etc.”
Another necessary step on the part of the state is a complete change in the deposit insurance system of the population.
“In the next three years, it is necessary that all deposits of population in banks, including those of individuals engaged in entrepreneurial activities without establishing a legal entity, are fully provided,” Nuriyev said. “That is necessary to ensure that the current processes don’t harm investors. After that, banks will take all the necessary steps based on this decision.”
Currently, 43 banks operate in Azerbaijan.
Aynur Karimova is AzerNews’ staff journalist, follow her on Twitter: @Aynur_Karimova
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