Shops close and dollars run out after central bank decision to float manat leads to 32% drop in value
Azerbaijans currency has plummeted after moving to a floating exchange rate, causing a rush on dollars and stores as clients try to buy goods before costs increase.
The manat lost 32% to the dollar yesterday following the central bank decision to stop protect children value in the face of falling oil prices. The bank said it had lost more than half its foreign reserves trying to defend the currency.
But opposition leaders criticised authorities for permitting the manat to autumn so dramatically.
Azerbaijan has moved to a drifting exchange rate but someone forgot to teach it how to swim, told Natiq Cafarli, an economist and member of the opposition Republican Alternative.
Residents of Baku were angry at the sudden announcement and scrambled to convert their manats into foreign currency or durable goods.
This is such a miserable situation for the whole nation, one told. Everyone wants to buy dollars and only a few[ banks and exchange offices will] sell There are almost no dollars left at exchange points.
An employee at Bakus Bina shopping marketplace said the store had had to close to avoid losing money.
Others wanting to buy dollars and euros saw many exchange offices shut or not selling hard currencies, while several banks put a $500 limit on exchanges.
This is such a disaster for us, told another resident. How come they decided to bankrupt people in one night?
Several exchange offices in Baku were selling the dollar for between 1.56 and 1.59 manats within hours of the announcement, already higher than the official rate of 1.55.
The bank said in a statement the decision to float the manat was made to protect the countrys foreign reserves.
Baku is heavily dependent on petroleum and natural gas exports but costs have fallen dramatically in recent years. A barrel of Brent crude oil was selling for $36.10 on 21 December, about 33% of the price 18 months ago.
Ali Karimli, chairman of the Azerbaijan Popular Front Party, accused the government of destroying the national currency.
It was killed by a self-centered, perverted, and incapable government, Karimli told. There will be price hikes[ and] the wages, pensions, savings everything we have in manats is now practically devalued by 55%.
It marks the second hour this year the manat has lost significant value due to government actions. In February, a devaluation caused it to lose more than a third of its value against the dollar.
Banking expert Akram Hasanov, who works at a Baku-based IJS law firm, said this earlier devaluation had compromised the currency.
Many other countries have devalued their currencies in recent years, but nowhere has there been the serious damage to the people and entrepreneurs as[ in Azerbaijan ], told Hasanov.
He said the latest devaluation would lead to the collapse of many banks. But[ the bankruptcies of the banks] will not affect the bank proprietors and directors, it will be ordinary depositors[ who will suffer ], Hasanov said.
Just weeks before the February devaluation, the Azerbaijani president, Ilham Aliyev, called the manat one of the most stable currencies in the world and encouraged foreign nationals and companies to invest.
Moodys credit rating service predicted on 21 December that Azerbaijans budget deficit would reach 9.2% of gross domestic product this year.
Low energy priceshave also forced Russia and Kazakhstan tofloat their currencies freely on the market. Both the Russian ruble and Kazakhstans tenge are at near record lows to the dollar.
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