The Central Bank of Azerbaijan switched to the floating rate of manat from Dec.21, 2015.
The decision has been made taking into account the strengthening of long-term shocks in foreign economy in order to equilibrate the balance of payments, keep the foreign exchange reserves in the country at critical level and ensure the competitiveness of national economy on the international arena, said the message from the bank.
Thus, the exchange rate of manat will be formed in accordance with the fundamental factors determining the supply and demand situation on the currency market, according to the decision.
The Central Bank will participate on the currency market (intervention) accordingly.
Meanwhile, the regulator will take complex measures to ensure the security of the population's deposits and other deposits, improve the deposit insurance system, enhance the financial sustainability, liquidity position and capital of banks.
“Difficult processes in the global economy, latest decisions of leading banks in the world, rise of demand on the energy market, weakening economic growth in big countries which are the main oil producers, as well as global factors have led to over threefold decline in oil prices since June 2014," said the CBA.
“All these processes affected Azerbaijan as well, which is closely integrated with the global economy processes," said the message. “As a result, the foreign trade surplus and currency receipts to the country have decreased sharply."
Taking into account that all these processes put serious pressure on the exchange rate of manat and the country's currency market, the national currency was devaluated in 2015 and the economy, currency market and the exchange rate of manat were adapted to the oil price of $50-$55, according to the CBA.
However, sharp decline in oil prices in July again enhanced the pressure on the exchange rate of manat and currency market, said the message.
Meanwhile, the continuing devaluation in neighboring countries negatively affected the competitiveness of the national economy on the international arena, said the CBA.
Therefore, it became necessary to bring the currency market and the exchange rate of manat into line with oil prices, said the Central Bank.