Azerbaijan to compensate consequences of manat's devaluation (UPDATE)

Baku, Azerbaijan, Dec. 21


Up until yesterday, Azerbaijani government has taken all possible actions and measures to maintain the stability of the national currency, said Azerbaijani president's aide for public and political affairs, Ali Hasanov.

Hasanov made the remarks Dec. 21 commenting on the Azerbaijani Central Bank's decision to introduce a floating exchange rate of manat.

"This occurred despite most oil-producing countries, as well as neighboring trade and economic partners of Azerbaijan, CIS countries changed their monetary policy rather earlier," Hasanov said.

Hasanov said that the experts are well aware of a country's huge losses as a result of preserving the stability of the currency through intervention.

"However, it is known that the transition to a "floating rate" is not without losses for the public," he said. "It causes many social and economic problems, and doesn't pass without negative impact on internal situation in the country and public opinion. During the last several days in Azerbaijan, it was obvious to everyone that switching to the "floating rate" is inevitable, and the Central Bank has to reckon with that."

"The world has been experiencing an economic crisis for a certain period," Hasanov said. "The production and income of most countries decline and national currencies lose their values."

"Regardless of economic power and potential, the national currencies lose their value quickly in all the countries - from one of the most powerful countries in the world, China, up to the small countries," he said. "National currencies of our closest foreign trade partners, namely, Russia, Turkey, Iran, Kazakhstan, Georgia and others were released to "free float" long ago. This created problems in the economic and trade relations with them."

Hasanov said that the domestic production was gradually decreasing in Azerbaijan due to the stable and high exchange rate of manat.

"In this situation, a "free floating" rate of manat was inevitable," he said. "However, Azerbaijani government tried to make the processes as imperceptible as possible and hold the processes that can have a negative impact on the social conditions of the population. But as you know, our country is part of the world. We had to keep up with and adapt to the economic processes."

"Azerbaijan is an oil country," he said. "Such countries as ours can not but take into account the sharp drop in oil prices, which is the main source of income of the state budget. The prices on oil and oil products have reduced threefold since early 2015. This means that Azerbaijan's revenues reduced threefold.

"Many countries with oil as the main source of income took a decision to pass to a floating exchange rate of the national currency in early 2015," he said.

"But during this period, the Central Bank of Azerbaijan has been trying to cover this deficit through its foreign exchange reserves. However, the continued regulation of the exchange rate through the foreign exchange reserves could further damage the country's economy. It is clear to everybody that the oil prices are not expected to increase on the world market in the near future. Of course, this is stipulated not only by the objective laws of the market. The subjective reasons and first and foremost, the relations between Russia and the US played a significant role. It is clear for everyone who follows the news that in terms of increasing geopolitical competition with Russia, the US chose the policy of weakening the opponent's economy by artificial impact on the oil prices on the world market. First, the US took control over OPEC and limited the opportunities of the organization in decision-making on oil prices by various ways. Afterwards, the US lifted a 40-year ban on the export of American oil."

The House of Representatives supported a bill to lift the ban amid the rapid reduction in oil prices on the world markets, Hasanov said.

"This decision can not be explained by the laws of the economy," he said. "The US began to sell oil when oil prices reached a record low level - $37 per barrel. They didn't do this when oil prices were record high - almost $150 a barrel."

"This proves once again that the US aims at regulating the prices this way, rather than at the economic development and an increase in production," he said. "Finally, simultaneously with lifting of the ban on the export of oil, the US Federal Reserve decided to raise the rate. This consolidated the dollar and depreciated the currencies of other countries."

Hasanov said that this was another reason for another decrease in oil prices and revenues of the countries exporting this energy resource.

"If we take into account that neighboring Iran plans to bring its oil to the world market next year, it is possible to conclude that oil prices will not return to the previous level soon," he said. "The global economic crisis, the transition of the closest trade partners of Azerbaijan to a floating rate of the national currency, a sharp drop in oil prices and other factors have made the recent decision of the Central Bank inevitable."

"However, this does not mean that the authorities have let the process take its course and will not take advantage of some regulatory mechanisms," he said."First, the government will try to make this process as imperceptible as possible for citizens in need of social protection."

"In the current conditions, actions aimed at stimulating the domestic production, revealing the areas which are still in the shadow economy, combating monopoly and corruption, creating artificial obstacles for entrepreneurs' activity and so on, will be taken," Hasanov said.

"At this stage, the main purpose is to compensate the negative consequences of devaluation through the use of new market mechanisms," he said. "The Azerbaijani government will do everything for that."

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