Azerbaijan, Baku, 12 March / corr. Trend I. Khalilova/ A decision by the National Bank of Azerbaijan (NBA) to pursue a rate policy on the basis of a two-currency basket (dollar and euro) aims at preventing the nominal effective rate of the manat from further dropping which has dropped by 1% since the beginning of the year, Emin Huseynov, the head of the Statistics and Research Department of NBA said.
"If we have a look into operations that took place in 2007, we can see that one of the reasons that caused inflation is import," Huseynov said. One third of inflation appeared as a result of the price rise in trade partners which affected the nominal effective rate of the manat compared to currencies of foreign trade partners of the country.
As import goods should be sold in mantas, the prices of imported goods are high due to the changeability of the rates of leading world currencies. Last year the rate of the manat against US dollar strengthened by 3%, but it dropped against the Euro due to the superfluous drop in the dollar rate against a number of European currencies. Therefore, in order to eliminate superfluous strengthening of the nominal effective rate of the manat, the NBA decided to take into consideration not only the rate of the manat against the dollar in the domestic market, but also the dynamics of the dollar rate against currencies of foreign trade partners of Azerbaijan, Huseynov said.
"In order to be able to influence a nominal effective rate, we began targeting the rate of the manat against the Euro which will give true forecasts on the dynamics of the nominal effective rate and to hinder inflation in the country," he said.
As a result of integration into the European economic system many economic bodies of Azerbaijan carrying out operations with European countries are subject to risk.
Transition to targeting the rate with help of the two-currency basket stimulates development of the domestic currency market. As a result, the participants of the market will be able to employ improved methods of risk management.
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