Azerbaijan, Baku, Sept. 19 / Trend /
Ellada Khankishiyeva, Trend Analytical Centre Head
The euro in Azerbaijan is gradually returning its position in the foreign exchange market which it lost in late April.
Falling to a level of one manat per euro on May 16 this year, the European currency was traded below this level almost four months. Starting from September 10, the euro once again crossed the bar equal to one manat. According to the Azerbaijani Central Bank, its official exchange rate is 1.0258 manat to one euro now.
Strengthening the currency at a global level due to the good news from the Eurozone boosted the euro on the Azerbaijani foreign exchange market. In particular, these are down to Germany's participation in the European Financial Stability Facility and the positive statistics on industrial production in the euro area.
However, the current increase in the euro rate compared to the manat is not something extraordinary. It will not lead to perceptible changes in the domestic currency market. A slight increase on goods imported from the Eurozone is possible. Their share hit 30 per cent of the country's total imports.
It should be stressed that the goods imported from the Eurozone, generally have an investment destination. So the rise in the euro rate will first result in higher prices on industrial equipment. Therefore, this will not lead to inflation.
The increase in the dollar rate is more preferable than the euro for the cost of Azerbaijani foreign currency reserves, as 60 per cent of the Central Bank's foreign exchange reserves are in dollars and 35 per cent in euros. The currency structure of the investment portfolio of the Azerbaijani State Oil Fund looks the same, where 50 per cent of the assets are placed in U.S. dollars and 40 per cent in euros.
The best option for people's savings is to include different currencies in its composition so as not to lose. Today deposits in manat bring more dividends than in dollars and euro. The statistics of the Central Bank testifies to his. As of August 1, 2012, around 56.27 per cent of the population's funds were placed in the national currency - manat. The population has no other choice. The unstable economic situation in the Eurozone does not guarantee the stability of the euro exchange rate.
The lack of stability in the global financial markets delays the process of issuing Azerbaijani sovereign Eurobonds. In this situation, the increase in the euro rate may affect the acceleration of the process. The debut Eurobond issue for the Azerbaijani government is more connected with the growth of the country's image than with the need to borrow money. This means the country wants to create a benchmark for the Azerbaijani securities in the global markets. This guiding line will work for many years. The Finance Ministry will aim to achieve the maximum profitable spread in the European market.
For the first time, the Azerbaijani government included a forecast average annual exchange rate of the national currency compared to the euro in the concept of the socio-economic development in 2012. The budget package usually fixed a forecast of the average exchange rate of the manat compared to the U.S. dollar. The forecasts were drawn up on a formal basis in relation to the European currency.