BAKU, Azerbaijan, December 6. Azerbaijan is expected to maintain the manat's peg to the U.S. dollar at AZN1.7 per US$1, supported by regular foreign exchange interventions and a solid reserve position, Trend reports citing the S&P Global Ratings.
S&P notes in its latest report that the Central Bank’s reserves increased to US$11.4 billion as of Oct. 31, 2025 (around four months of current-account payments), providing a meaningful buffer under our baseline oil-price assumptions.
“However, given the economy's reliance on hydrocarbon revenue, a prolonged period of weak oil prices could prompt the authorities to consider a controlled exchange-rate adjustment to preserve reserves. The peg anchors inflation but limits CBAR's monetary-policy autonomy, a constraint reinforced by its still-developing operational framework. Deposit dollarization has fallen to 29%, from 55% before the COVID-19 pandemic, supported by higher manat deposit rates and exchange-rate stability. However, it remains highly sensitive to confidence and, in a renewed foreign exchange pressure scenario, a rapid shift back into foreign-currency deposits is likely,” the report says.
S&P analysts recall thatAzerbaijan has launched a series of reforms under its 2024-2026 Financial Sector Development Strategy, aimed at strengthening prudential regulation and bank supervision.
“The authorities are phasing in Basel III standards and piloting a risk-based supervisory framework, alongside initiatives to enhance governance, disclosure, and macroprudential oversight. Implementation remains at an early stage but, once fully operational, these reforms should help narrow gaps with international regulatory practices. Meanwhile, the banking sector has maintained a stable funding profile supported by a steadily expanding deposit base. Deposit dollarization has declined toward regional peer levels but remains significantly higher than loan dollarization, resulting in structural currency mismatches between foreign-currency liabilities and predominantly manat-denominated assets.”