Azerbaijan Suffers From Currency Crash, Low Oil Prices

January 14, 2016

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The Armenian Mirror-Spectator

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By Arzu Geybullayeva and Tony Wesolowsky

BAKU (RFE/RL) — Deeply in debt, a man in Azerbaijan sets himself alight — highlighting the human cost of the collapse of the country’s currency.

Alik Navruzov’s self-immolation in front of his workplace on January 7 was said to be his response to the sudden crash of the manat, which has lost about a third of its value since Azerbaijan’s Central Bank announced in December that it would no longer prop up the currency.

According to colleagues at the school in Neftchala where he worked as a maintenance man, Navruzov complained of having bank loans he could no longer make payments on.

The 63-year-old survived, and is now reportedly in stable condition at a hospital in the city, located in the eponymous oil-producing region some 130 kilometers south of the capital. But there appear to be no signs of relief for Navruzov’s dire financial straits — a situation that is all too familiar to a growing number of people in Azerbaijan.

Less than a year after the Caspian Sea state hosted the first-ever European Games, an event President Ilham Aliyev had hoped would showcase his country’s prosperity, it’s evident that from the government to the people on the street, Azerbaijan is struggling financially.

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In announcing its decision to stop propping up the currency on December 21, the Central Bank argued that the practice had diminished foreign reserves by more than half.

Falling global energy prices have hit hard in Azerbaijan, where energy exports account for about three-quarters of state revenues. To offset the envisioned budget hit, the Central Bank changed the way it values the manat nearly a year ago. But the move away from the dollar to a dollar-euro basket in February 2015 also caused a drop in the currency.

Currency devaluation always comes with the double whammy of falling spending power and rising prices, and Azerbaijan is no different. When news of the Central Bank’s decision reached the streets, people across the country rushed to shops to scoop up whatever they could before prices adjusted to the new reality. With less money in their pockets, many people in Azerbaijan are forced to forego less essential items, but food is definitely not one of them. As a result, the cost of many items — such as tomatoes and grapes — has shot up, in some cases by as much as 100 percent.

A shop owner in the capital, Baku, explained why he had to raise his prices. “I, too, pay rent. My landlord raised the rent. My suppliers also raised prices,” Shamil Hasanov said. “What can I do? The prices for everything — butter, rice, sugar — all were raised, and I can no longer sell them for less.”

Even small expenditures are being weighed more carefully by average Azerbaijanis. Valikhan Karimov, a 68-year-old pensioner, explained why buying his grandson a ticket for an attraction on Baku’s busy promenade requires sacrifice.

“I paid two manats for this ride, which lasted two minutes. I made those two manats selling 10 kilos of apples,” he said. “I come here once a year [eds. he lives in Quba] to take my grandchild out, and this is all I can afford.”

The Armenian Mirror-Spectator

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Others feeling the pinch are those people who took out bank loans, paid out, of course, in manats, but calculated in dollars. Abdul Akhundov, who works in the IT field, said he can’t make a dent in paying down his loans from two banks worth some $3,000. “I took a loan a year ago, before the devaluation. I asked the bank for a loan in manats but the gave it to me in dollars,” Akhundov lamented. “No matter how much I argued with the bank at the time telling them we did not live in America so why make me take a loan in dollars it didn’t make any difference.”

Elnur Bayramov, who lives in Ganca, said he called his bank immediately after the manat plunged to tell them he couldn’t make payments anymore. “My loan was in the amount of $2,000 and I haven’t even bothered to figure out how much I owe now with the new exchange rate,” Bayramov said. “I called the bank, too, telling them to stop calling me every minute and that I will pay when I have the money and if they are not happy about it they can take me to court.”

Aliyev’s government, criticized in the West for its abysmal human rights record, appears ready to help those hardest hit by the increasing prices. Labor and Social Welfare Minister Salim Muslimov announced on January 6 that his ministry was working on ways to raise welfare payments, and should deliver proposals by the end of the month. He said his ministry was monitoring prices in six regions of the country – Baku, Sumgait, Mingachevir, Ganca, Lankaran, Tovuz, and Agsu – and, based on those observations, his ministry would calculate how much social welfare payouts should rise.

However, raising expenditures is something Aliyev’s government is probably less than eager to do. Officials in his government now appear preoccupied with finding where and how to cut costs.

The Foreign Ministry announced on January 5 that Baku was looking to make cuts to staffing and other costs at its foreign embassies, but denied reports in the Azerbaijani press that a number of embassies in South American countries would be closed.

Meanwhile, ordinary Azerbaijanis are left to cope with the hardships amid growing disillusionment with the government. “I worked in three different places before manat died,” wrote one respondent to a questionnaire by RFE/RL’s Azerbaijani Service. “I don’t know in how many more places I will have to work now.”

Another respondent expected the manat to continue on its downward spiral. “Everybody knows the dollar will continue to get more expensive,” the person wrote. “In this situation, you should take out bank credit in manats and then convert it into dollars and wait for the next devaluation. This way we will ‘rob’ the banks that usually ‘rob’ us.”

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