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Currency Crisis in Azerbaijan

Currency Crisis in Azerbaijan

The world met 2016 with declining prices of crude oil and depreciated currencies.

Despite the fact that the first days of 2016 saw increasing prices for oil which are down by two-thirds since mid-2014, to form budget revenues relying on temporary price jumps would be a wrong step. To overcome the current difficult economic situation, the Azerbaijani government has prepared a plan of measures, Ogtay Asadov, the Chairman of the Parliament, has said.

“The plan will be made public soon,” he stated at the last meeting of the autumn session without revealing any details.

Commenting on the issues covered by anti-crisis plan, Vahid Ahmadov, a member of the Parliament, told Azernews that the government should pay significant attention to the development of the non-oil sector of the economy as revenues of the country from the sale of oil has sharply decreased.

He believes that first of all, the government should find solutions to the problems on the development of the non-oil sector, overcoming of the problems associated with customs and tax systems, and the mitigation of licensing issues.

The MP also expressed confidence that the government’s anti-crisis plan will improve the welfare of the population.

“In general, 2015 was a difficult year for Azerbaijan and the whole world in terms of economy. Although the Azerbaijani government was able to fulfill its obligations, the country faced problems with oil revenues due to falling oil prices. The CBA was forced to devaluate the national currency – for the first time in February by around 34 percent, and for the second time – in December by 48 percent. Thus, the manat saw 82 percent devaluation last year. That decreased solvency, while prices increased,” he said.

Ahmadov also noted that the Parliament has proposed the government to repay up to 10,000 manats of loans of the population at the previous – 1 USD/1.05 AZN exchange rate, to extend deposit insurance and increase maximum sum of insured deposits from 30,000 manats to 500,000 manats, as well as to put a moratorium for three years. Another offer was to join small banks to larger banks with improved capital turnover, liquidity and credit portfolio that may reduce interest rates.

“All these problems should be resolved in a short term,” he said offering to increase attention to the development of the non-oil sector.

“It is important to reduce imports regardless the structure of import, to increase attention to the development of sectors engaged in production of export-oriented products. The government should pay special attention to the development of such sectors as agriculture, industry, tourism and information technologies,” he concluded.

Before announcing the anti-crisis plans in details, the government is taking measures to improve the welfare of the population and to prevent impact of crisis to the national economy.

In particular, by the end of January 2016 the Ministry of Labor and Social Protection of Population will submit proposals to the government to increase the amount of social aid on the basis of the new prices in the consumer market.

Minister of Labor and Social Protection of Population Salim Muslimov said at a press conference on January 6 that aids are financed through the state budget, and that will be taken into account while adjusting the budget forecasts.

In this regard, it is first necessary to complete the monitoring of prices on the markets.

“Every week, namely on Tuesdays and Fridays, our monitoring groups study the market prices in six regions of the country. It is only about changes in food prices, which are included in the food basket,” he noted.

“We regularly receive information about changes in prices in the markets of these cities and currently, we are defining to what extent does the total cost of the food basket has changed. We will submit information about this and our proposals regarding the recent change in the exchange rate of the manat, and other factors on the cost of the food basket to the government,” the minister stated.

One of the most important steps which should be taken for preventing the consequences of crisis to the economy and social life of the country is to avoid job cuts.

In this regard the country’s employment agencies are studying how the number of people applying for unemployment aids has changed. “Most likely, the results will become clear by the end of the month,” Muslimov said.