Azerbaijan’s Central Bank expecting further decline in dollarization (UPDATE)
Details added (first version posted on 11:37)
Baku, Azerbaijan, March 1
By Anvar Mammadov – Trend:
The level of dollarization will gradually decline in Azerbaijan, Director of the Monetary Policy Department of the Central Bank of Azerbaijan (CBA) Azer Alasgarov said at an annual meeting of Fitch Ratings in Baku March 1.
“Dollarization in Azerbaijan reached its peak, totaling about 80 percent in early 2017, but began to decline gradually during the year and it decreased by 10 percentage points by the end of the year,” he added.
“We believe that dollarization will continue to decline in the short term,” Alasgarov added.
Touching upon the stabilization of the exchange rate, Alasgarov stressed that presently, the exchange rate of manat to the US dollar in Azerbaijan is formed on the basis of demand and supply in the market.
He said that even before January 2017, the banks were limited to choose the buy and sell foreign currency rates.
"We had a margin of four percent, which was liquidated in January 2017,” he said. “Since that time, banks have been selling the currency at a rate close to the official one, which shows that the rate is set by the market, the market regulates itself."
Alasgarov said that presently, the CBA does not interfere in the regulation of the exchange rate, but depending on macroeconomic processes it can do that at any time.
"The exchange rate is one of the most important transmission channels of monetary policy,” he said. “Therefore, when making a decision on monetary policy, we think how this will affect the exchange rate."
“The decrease in the money supply in early 2017 contributed to the stabilization of the exchange rate," he said. “In its turn, the positive effect of the balance of payments surplus on the currency market favorably affected the monetary situation."
He said that the CBA decreased the discount rate in February and intends to reduce it during the year.