WHY DID DOLLAR COLLAPSE?
The Sunday before last could be called as a вЂ�black dayвЂ™ for US dollar in Azerbaijan. If on Friday the US dollar in regarded to Azerbaijani manat was a bit higher than 4500 manats. On Saturday it first dropped to 4300 manats, then to 4100 manats, while late the day - 4000 manats. Drop in rates continued on Sunday, when some exchange places sold dollar at 3800 manats. Over 2 day-offs cash dollar rates fell 15%, which is enough to obscure the popularity of the currency in the country.
However, as a result of extreme measures taken by the government on Monday it was possible to restore the lost positions and return to rates at 4500 manats. On Tuesday it was restored in the point of 4520 manats. Starting on Wednesday the cash dollar market to its traditional course, exactly following the rates set by the National Bank of Azerbaijan.
Drop in US rates caused many questions in the society, which were on the focus of many governmental and independent experts. Their opinions rarely were the same: the cash dollar was artificially decreased.
Economy didnвЂ™t give signalвЂ¦
The long-term fall in the rates of US dollar in Azerbaijan is based in three factors, characterized with a rise in public sector deficit. The least leads to a rise in domestic demand and intensification of the inflation rates in the country. In case of intensification of inflation the NBA is faced with the difficult dilemma. On the one hand, it is necessary to control the inflation, on the other to control over the exchange rate of the national currency to maintain it within the limits not evolving any problem for the foreign trade. It is impossible to reconcile the two tasks in the current realities of Azerbaijan. If it is necessary to cut money supply, then turns out necessary to purchase less currency in the market and let the dollar fall. From the aspect of the foreign trade extreme drop in dollar rates is not profitable for Azerbaijan, as it complicates the state of local exporters and fields, oriented at domestic demand with simultaneous improvement of the state of importers. In this situation the NBA turned out an active player of the currency market, enabling the dollar to fall. Since the beginning of the year the official rates of the US dollar fell 338 points.
However, fall in the official rates occurs fluently, and the process is under the control of the NBA and the government. A day before the collapse the US dollar rates was fixed at 4577 manats It testifies that that there was not any macroeconomic reasons for sharp drop in cash dollar rates.
Dollar вЂ" a victim of speculation
The reason for drop in the rate of cash dollar was explained with deficit in the national currency.
"The crisis of the cash currency rate of US dollar was a result of negligence by the bank which did not acquire the national currency from the National Bank of Azerbaijan (NBA) on Friday to ensure the activities of the exchange places. The banks which received the national currency did not distribute it among the exchange places, motivating that the exchange places should independently purchase and sell currency," the Cabinet of Ministers said.
However, the path leading to the crisis of dollar was clarified. The NBA ceased the activities of 20 exchange places. вЂњThe NBA will defend the rights of people who suffered during the exchange of US dollar at groundless rates. The citizens are only required to produce the checks received from the exchange place. Almost all prominent independent and opposition experts shares the opinion that artificial deficit evolved by commercial banks in the national currency was the key reason causing drop in dollar rates.
No one could doubt that a drop in US dollar rates was a result of speculative attacks. The scale of fall of the cash rates of the US dollar and the period of collapse (day-offs at the currency exchanges and absence of the head of the NBA) testify for artificial agiotage around dollar.
However, deeper analysis of the situation enables with more prudence to suppose that the initial reason for the happened was a natural absence of manat reserves, which appeared as a result of long macroeconomic tendencies. The profiteer only benefited the situation and decreased dollar. Firstly, complications in the cash market gave to know several months ago, when there appeared a deficit in manat in the International Bank of Azerbaijan. Secondly, the situation in the cash currency market remains tense, though the players more probably do not have вЂ�clumsyвЂ™ spirits. The deficit in the cash-vending machines of the IBA also testifies for it. However, a deficit in the national manat is a result of inflation targeting policy, which promotes gradual transition of dollar in economy. The monetary authorities seem to grant a respite to the cash dollar market. But it is a temporary measure. The official rate of dollar will continue dropping even in such a tendency, even if no further fall appears in cash dollar rates,
while a problem of deficit in manat can remain and event strengthen.