BAKU, Azerbaijan, Dec.21
By Zeyni Jafarov – Trend:
Azerbaijan’s market has remained highly liquid and the national currency manat’s exchange rate remained stable despite fluctuations in the exchange rates of the country’s main trading partners in 2020, as well as a growing pressure on the manat’s rate in the domestic foreign exchange market, especially since March, Trend reports referring to the Ministry of Finance.
In this regard, the mutual implementation of monetary and fiscal policies is of great importance in order to ensure macroeconomic stability Azerbaijan amid the global economic challenges and difficult external situation, said the ministry.
"Along with the above, the likelihood of depreciation of the manat against the dollar and other major foreign currencies remains one of the main risk factors for Azerbaijan's fiscal position. So, one of the main channels for transferring exchange rate risk to the state budget is that, amid the dropping oil prices, the forenamed risks become even more acute," the ministry noted. "On the other hand, given that when drawing up the state budget for 2021 the official exchange rate was taken at 1.7 AZN/USD, the likelihood of a weakening of the manat against foreign currencies includes the risk of a proportional growth in the expenses for servicing the external public debt in the budget."
According to the ministry, amid the ongoing pandemic and tightened quarantine measures, the use of soft monetary policy as an anti-crisis measure stimulates economic activity by easing lending terms and satisfies the demand for liquidity in the foreign exchange market.
"However, a significant decrease in the population’s aggregate demand leads to excess liquidity in the foreign exchange market. In this case, the operations carried out by the Central Bank and the Ministry of Finance in the securities market also prevent the pressure that may arise in the foreign exchange market," the ministry summed up.
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