Russian disease: why Azerbaijan let its currency float freely

Azerbaijan let its currency float freely, and then the dollar increased by one and a half times. Now, for the Azerbaijani vegetables and fruits it will be easier to take the place of the Turkish ones, banned in the Russian market.
Origin source
Here floats AZN

On Monday, December 21, Azerbaijan did what Russia has done in the autumn of last year - moved to a floating exchange rate of the national currency, the manat. This decision, as stated in the announcement of the central bank of the country, is due to "increasing shocks in the foreign economy." According to the release, the transition to a floating exchange rate was done "in order to balance the balance of payments, save foreign exchange reserves in the country at a critical level and competitiveness of the national economy in the international arena." A momentary increase in the official dollar exchange rate amounted to almost 50% if on Friday, December 18, it was set at 1.05 manat per dollar, then on Monday - 1.55.

Azerbaijan for the second time devaluing the currency in a calendar year, before the rate of manat kept unchanged for 12 years. At the beginning of the year the US dollar was worth 0.78 manat, the first decision of the devaluation was made in February. On the maintenance of the course, Azerbaijan has spent half of its gold reserves. At the end of December 2014 they amounted to $ 12.65 billion, and at the end of September, ADthat year (the latest data released by the Central Bank.) - $ 6.52 billion in February, "the economy, the foreign exchange market and exchange rate of manat were adapted to the price of oil at $ 50-55," the Central Bank noted in a release. Now oil is below $ 40, and required a new adaptation, which will be permanent: a floating exchange rate.

Azerbaijan - the third oil producer in the former Soviet space. According to BP, Azerbaijan has proven oil reserves of 7 billion barrels. According to OPEC, in 2015, the country was producing daily 860 th. Barrels. According to World Bank data, in 2014, Azerbaijan's GDP grew by 2.8%, while in 2013 - by 5.8%. In 2016, the budget revenues account for 53.5% of the oil and gas sector of Azerbaijan.

Adapt the rate of national currency to the new prices of oil and has adapted to these prices exchange rates neighbors is necessary not only to Azerbaijan. In August, the floating rate of tenge went Kazakhstan. Late last year, it introduced a 30 percent tax on the purchase of foreign currency, Belarus (see. Figures).

Correspondence of price tags

Due to the depreciation of some Azerbaijani shopping ceminute suspended the sale of imported products. Publication speaks Lithuanian, Russian and Ukrainian products, they are now re-write tags. Agency also reports that Azerbaijani banks have temporarily suspended remittances, many exchangers also closed.

Devaluation increases the competitiveness of Azerbaijani exports. Russian imports from the country primarily fruits and vegetables - this is 40% of imports in value terms (FCS data for 2014). The devaluation of the manat creates favorable conditions for Azerbaijani companies exporting fruits and vegetables to Russia, says the director of the Institute for Agricultural Market Studies (IKAR) Dmitry Rylko. Taking into account the embargo on Turkey, which will affect a number of agricultural products, the share of Azerbaijan in the structure of imports of these products to the Russian market may grow, Rylko said. The embargo, which comes into force on 1 January 2016, will be extended to Turkish tomatoes, tangerines, oranges, grapes, apples, pears, apricots and others.

"The devaluation is unlikely to have a noticeable impact on the Russian marketAs Azerbaijan's share in the structure of imports of fruits and vegetables in Russia is low and amounts to about 4.5 and 3% respectively, "- said RBC Irina Goat, CEO of IA FruitNews. "In recent years, Russian importers of fruit began to explore the Azerbaijani market for the purpose of acquisition of own capacities. They buy orchards, packing companies, as well as enter into partnership agreements with local companies. Probably, the devaluation will accelerate the development of the Russians in this market ", - adds the Goat.