Page 89 - Azerbaijan State University of Economics

54. Fakhri Mammadov: Exchange Rate Stabılıty and the Development of Fınancıal System
55. in Azerbaıjan
56.
57.
Figure 2: USD/AZN Exchange Rate

Source: The Central Bank of the Republic of Azerbaijan, 2017

The next attempt of CBAR was the organization of deposit auctions in order to
attract deposits in national currency and consequently extract more of national
currency from circulation. The deposit auctions helped the Central Bank to achieve
the following purposes:

1. Reduction of the volume of manat that is in circulation.
2. Increasing the profitability of manat, so by this way enhancing the level of
confidence in national currency.

Bringing back the control over deposits, that were withdrawn because of reduced
confidence in national currency.

Beginning from January of 2017, monthly auctions were offered by SOFAZ, at the
amount of 250 million US dollars. This amount has met the market requirement, so
caused the stabilization of manat. Also, global oil prices have risen (more than 50$
for each barrel). Both of these reasons caused the appreciation of manat.

However, the stabilizing policy of country can’t always be efficient. The policy of
government to close many exchange places lead to the illiquidity of foreign
greenbacks. This situation lead that the illegal black currency market confronted to
the foreign exchange currency market of Azerbaijan.

SWITCHING TO FLOATING EXCHANGE RATE AND CURRENT
SITUATION:
We can surely say that the reason for devaluation and changing the exchange rate
system is low oil prices and enormous cash outflow from Azerbaijan to neighbor
countries as neighbor countries devalued their currencies earlier. Decline of oil price
had a negative impact on SOFAZ’s 2015 revenues, oil revenue fall from $15707,00
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