BAKU, SEPT. 15 2016 (The Conway Bulletin) – Currency exchanges in Azerbaijan have started selling US dollars once again after the Central Bank sold $300m and increased interest rates to their highest level since 2008 to support the manat.
The near-emergency measures were taken last week after currency booths stopped selling US dollars because of a lack of confidence in the Azerbaijani manat which had lost 11% of its value since the start of June. Confidence in the manat was destroyed last year when two devaluations wiped 50% off the value of the currency.
Azerbaijan’s economy is reliant on oil for its revenues and the government has been slashing projects to account for the drop in revenues. Even so, economists forecast a GDP drop this year.
“There is a crisis in every single sector of the economy, starting from trade, ending in construction, agriculture, and services,” Zohrab Ismayilov, a Tbilisi-based Azerbaijani economist told The Conway Bulletin.
And this is being felt at street level where jobs have been lost, savings cut in half and prospects diminished. Earlier this year a series of protests across the country, unusual in Azerbaijan where the security forces normally maintain a tight grip, shook the government.
Rashad, 31, the owner of a small catering business in Baku, told the Conway Bulletin that like most Azerbaijanis he has had to resort to using the Black Market to exchange manat into US dollars.
“I had to have dollars and at the weekend I could not find an open bank which has a running exchange service. So, I found a friend who knows an illegal exchange place and did my exchange there,” he said.
And the economy is tightening.
“Because of the economic situation, companies are cutting their costs and the market is becoming too narrow,” he said.
Mr Ismayilov, the economist, said that the Azerbaijani government could only prop up the currency for so long.
“Everybody now expects the third devaluation,” he said.
“It is very likely to happen by the end of this year. And it will be a big blow to the economy.”
