Azerbaijan will bind Manat to the euro

The Azerbaijani manat will be pegged to the euro.

 

This was stated yesterday by the President of Azerbaijan Ilham Aliyev at a conference on outcomes of the first year of implementation of the "State Program on socio-economic development of districts of the Republic of Azerbaijan in 2014-2018". 

 

At the same time, he noted that further appreciation of the manat against the euro is not a positive factor. "I believe that a stable macroeconomic situation will be provided if the manat will remain linked to the euro. At the same time, it is only a positive impact on people's daily lives. At the same time, no problems should arise for our exports," the head of state said. 

 

The Head of Baku Interbank Currency Exchange (BBVB) Farhad Amirbayov told "Vestnik Kavkaza" about the dividends Azerbaijan will receive from binding the manat to the euro. 

 

"Firstly, it is worth noting that today the whole world is living in conditions of financial and economic crisis. It is not over. Secondly, there is a new outbreak of a currency war. Many countries with export-oriented economies are trying to devalue their currencies to maintain exports, to support their manufacturers. Azerbaijan focuses on exports, it is an oil-producing country. And today, when the price of oil fell, export revenues have significantly reduced," he said. 

 

The expert drew attention to the fact that the major trading partners of Azerbaijan, excluding oil, are the EU countries in which Baku gets machinery, equipment and a variety of other products.

"In December and January the euro fell against the US dollar quite hard. The European Central Bank announced quantitative easing. It is an emission pumping of the eurozone. This will certainly lead to a further decline of the euro. All this, as well as a number of other factors, have a strong influence on the exchange rate of the manat. Its stability against the dollar has been supported for many years. And if you look at the range in which it varies, we can see that the oscillation is insignificant. But the continuation of such a monetary policy depletes the Azerbaijani economy," Amirbayov believes. According to him, Azerbaijan is beginning to make changes in this area. "Yesterday Ilham Aliyev at a meeting talked about need for a change in the banking industry. It is a shift in focus from domestic consumer credit to conduct industrial policy - agricultural lending. The combination of all these factors, of course, makes us rethink monetary and exchange rate policy," the head of Baku Interbank Currency Exchange (BBVB) said. In addition, he said that the increase of the manat against the euro will lead to the fact that European goods will be cheaper. "In recent years, the Azerbaijani market has been getting more and more Russian goods. This is called the devaluation effect. This happened in 1998-1999. Now the same thing is happening. Azerbaijan seeks to diversify its economy to support its own producers, so I think the country cannot become part of a currency war, but of course it will make adjustments," Amirbayov concluded.

"In December and January the euro fell against the US dollar quite hard. The European Central Bank announced quantitative easing. It is an emission pumping of the eurozone. This will certainly lead to a further decline of the euro. All this, as well as a number of other factors, have a strong influence on the exchange rate of the manat. Its stability against the dollar has been supported for many years. And if you look at the range in which it varies, we can see that the oscillation is insignificant. But the continuation of such a monetary policy depletes the Azerbaijani economy," Amirbayov believes. 

 

According to him, Azerbaijan is beginning to make changes in this area. "Yesterday Ilham Aliyev at a meeting talked about need for a change in the banking industry. It is a shift in focus from domestic consumer credit to conduct industrial policy - agricultural lending. The combination of all these factors, of course, makes us rethink monetary and exchange rate policy," the head of Baku Interbank Currency Exchange (BBVB) said.

 

In addition, he said that the increase of the manat against the euro will lead to the fact that European goods will be cheaper. "In recent years, the Azerbaijani market has been getting more and more Russiangoods. This is called the devaluation effect. This happened in 1998-1999. Now the same thing is happening. Azerbaijan seeks to diversify its economy to support its own producers, so I think the country cannot become part of a currency war, but of course it will make adjustments," Amirbayov concluded.