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WB: Azerbaijan undergoes major process of adjustment to low oil prices

WB: Azerbaijan undergoes major process of adjustment to low oil prices

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Date: 18 December 2015 13:52

Baku, Azerbaijan, Dec. 18

By Azad Hasanli – Trend:

Clarity in exchange rate management of the Central Bank of Azerbaijan (CBA) would make the situation for the investors more predictable, Mercy Tembon, the World Bank's Regional Director for the South Caucasus said in an interview with Azernews newspaper.

Fiscal tightening and Azerbaijani manat exchange rate uncertainty will affect the economy growth outlook adversely, she said.

“Low oil prices mean low oil revenues, which is the major source for foreign exchange supply in Azerbaijan,” Tembon said. “In addition, regional currencies such as Russian ruble, Kazakh tenge and Turkish lira have been depreciating strongly in the past year. This forces market participants to sell off their manats.”

“Furthermore, because of manat’s appreciation in real terms, competitiveness of Azerbaijan goods in the regional markets becomes challenging,” she said. “All these factors trigger the authorities to react to the external developments and adjust the manat exchange rate accordingly. Consequently, the interplay of oil price, regional currencies and the Fed’s interest rate decisions will create an environment in which the Azerbaijani authorities will shape their responses.”

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