Azeribaijan’s central bank devalued the manat on Saturday (21 February) by 33.5% to the dollar and by 30% to the euro, as slumping oil prices and an economic crisis in major trading partner Russia put pressure on the currency.
The bank abandoned the manat’s dollar peg on 16 February and began using a dollar-euro basket to manage the exchange rate after a nearly 60% drop in crude prices since June and Western sanctions against Russia over its annexation of Crimea.
Azerbaijan has been less affected than other former Soviet states by Russia’s economic problems but its economy is heavily exposed to price swings on global energy markets.
The manat was set at 1.05 to the dollar and 1.19 to the euro, down from Friday’s 0.78 and 0.89 manats respectively.
“This decision was made in order to support diversification of Azerbaijan’s economy, strengthen its international compatibility and export potential as well as to provide balance of payments sustainability,” a central bank statement said.
The bank said it would continue to take part in the foreign exchange market and that it would target a corridor for the manat against the dual-currency basket. The manat has been pegged at just over 0.78 per dollar since mid-2011.
Azerbaijan is becoming an increasingly important partner to the EU, largely in the context of the Southern Gas Corridor, project. The term stands for a project to bring Azeri gas from the Shah Deniz offshore field to Europe via the planned TANAP pipeline through Turkey and the Trans-Adriatic TAP pipeline via Greece and Albania to Italy. An interconnector in Greece is planned to bring Azeri gas also to Bulgaria and further
Oil and gas sales account for 95% of Azerbaijan’s exports and more than 70% of government revenues.