Azerbaijan in Crisis as Currency Plummets

The bank said in a statement the decision to float the manat was made to “protect the country’s foreign reserves”.

Baku is heavily dependent on oil and natural gas exports but prices have fallen dramatically in recent years. A barrel of Brent crude oil was selling for $36.10 on 21 December, about 33 percent of the price 18 months ago.

Ali Karimli, chairman of the Azerbaijan Popular Front Party, accused the government of destroying the national currency.

“It was killed by a self-centered, corrupted, and incapable government,” Karimli said. “There will be price hikes [and] the salaries, pensions, savings – everything we have in manats is now practically devalued by 55%.”

It marks the second time this year the manat has lost significant value due to government actions. In February, a devaluation caused it to lose more than a third of its value against the dollar.

Banking expert Akram Hasanov, who works at a Baku-based IJS law firm, said this earlier devaluation had compromised the currency.

“Many other countries have devalued their currencies in recent years, but nowhere has there been the serious damage to the people and entrepreneurs as [in Azerbaijan],” said Hasanov.

He said the latest devaluation would lead to the collapse of many banks. “But [the bankruptcies of the banks] will not affect the bank owners and managers, it will be ordinary depositors [who will suffer],” Hasanov said.

Just weeks before the February devaluation, the Azerbaijani president, Ilham Aliyev, called the manat “one of the most stable currencies in the world” and encouraged foreign nationals and companies to invest.

Moody’s credit rating service predicted on 21 December that Azerbaijan’s budget deficit would reach 9.2 percent of gross domestic product this year.

Low energy priceshave also forced Russia and Kazakhstan tofloat their currencies freely on the market. Both the Russian ruble and Kazakhstan’s tenge are at near record lows to the dollar.