Our Analytics 28 july — 14:19

Elman Rustamov came to people with foreign word 'revaluation' (Our comment)

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BY MAMMAD EFENDIYEV, ECONOMICS SECTION

Although the national currency of Azerbaijan, the manat, has long been healthy, rumours about its possible death are still continuing. True, such allegations are reducing progressively, but opposition-minded experts use any opportunity to express their opinion about the manat rate. In particular, they attack mainly the declared 'floating exchange rate policy' of the Central Bank of the country (CBA), although it is precisely due to its monetary policy that the manat has remained stable for a long time: 1.7 manat per 1 US dollar. And as the reasons for the predicted by them devaluation various scenarios are mentioned, both internal and external. And although these arguments are very weak, and their calculations are unconvincing, as Azeri Daily has repeatedly written about, these experts do not cease to frighten the population with their forecasts. But the latest statement by the Chairman of the Central Bank of Azerbaijan, Elman Rustamov, one thinks, can bring final clarity to this issue.

Elman Rustamov

Yesterday, the main banker of the country said the following at a press conference: 'Despite the fact that the rate of the manat has been stable for a long time, I want to note that since the beginning of the year, there has been a strong revaluation pressure on manat.' By the way, Elman Rustamov was making such a statement earlier too, in a narrower circle, but then the experts decide 'not to notice it.' And they had their own reason: the statement was not supported by concrete facts. Now the head of the Central Bank revealed the causes and prospects that the manat's strengthening can lead to.

We will not be able to forget for a long time what means a significant reduction in the cost of the manat, which Azerbaijan experienced on a large scale in 2015. The word devaluation, which was previously unknown to the country's population, has firmly hit the memory of Azerbaijanis. In a short time, the Central Bank lost almost all of its foreign exchange reserves, by using it to keep the manat rate within reasonable limits. The population too lost most of the funds accumulated over the years. Galloping inflation, excitement in the foreign exchange market: such things, unfortunately, are not forgotten. But it took only a couple of years, and now we are being scared by revaluation, that is, the strengthening of the manat.

At first glance, what could be better: the manat is strengthening. So let's raise its rate now. But experts are well aware that for world central banks, a sharp strengthening of the national currency is no less terrible trouble than its weakening. And we must fight it as hard as devaluations. By the way, Azerbaijan has already passed such a stage of manat revaluation in the middle of the first decade of this century, when a huge stream of petrodollars rushed into the country. But then the Central Bank managed to adjust this process relatively easily. Of course, even then, the Central Bank didn't do anything without intervening in the foreign exchange market with billions, but the effective economic policy of the government did its job and quietly rectified the situation.

Revaluation is when our house is stronger than dollar

Unfortunately, the main banker himself today did not want to touch on this issue. He noted only that since the beginning of the current year, the imbalance in the foreign exchange market has already reached $800 million. And this means that since the beginning of the year, the State Oil Fund has not sold $800 million in the country's foreign exchange market. One dropped indicator, but what it shows. And this means the following. The oil fund was unable to sell on the local foreign exchange market as much as $800 million, which in manat equivalent should have been transferred to the state budget. And this, in turn, means that the budget did not receive more than 1.3 billion manats of the transfer amount from the State Oil Fund. (In the first half of the year, the State Oil Fund at foreign exchange auctions sold more than $2.6 billion, which is 11.1% lower than last year's similar figure). This is the same 'strong pressure' on the manat in the direction of strengthening, which Rustamov mentioned. But with relief, he summed up that it was still possible to maintain a stable manat rate.

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