BAKU, Azerbaijan, January 30. The election of Donald Trump as the 47th President of the US, along with his serious statements made prior to taking office and the signing of various documents post-inauguration, has ignited a flurry of discussions globally. Analysts believe that his statements could have a significant impact not only on international politics but also on global economic processes. The strengthening of the US dollar by two percent relative to other currencies after the elections is one of the main factors that could influence global trade and financial markets. Given the manat’s peg to the US dollar, issues such as changes in global oil prices, depreciation of the dollar, and others highlight the need to consider the topic of Azerbaijan's national currency exchange rate. Azerbaijani economists believe that a sharp decline in oil prices could pose serious risks and concerns.
Commenting on the issue, economist Parviz Heydarov told Trend that the manat’s exchange rate is not determined by a floating exchange rate system. According to him, this is because the country’s foreign exchange inflows are not diversified and are ensured only through one channel—the State Oil Fund. As this fund is fueled by foreign currency from oil sales, the US dollar stands tall as the primary foreign currency. Consequently, the manat is essentially tied to the dollar, and its worth in relation to other currencies is influenced by the dollar. As a result, the value of the manat is managed through administrative means.
The economist pointed out that sterilization serves as one of the methods employed to keep the manat’s exchange rate in check through administrative means.
Heydarov also emphasized that sterilization is one of the instruments used to support the manat’s exchange rate. In 2024, the Azerbaijani currency market showed stability, and the demand for foreign currency in all auctions held by the Central Bank of Azerbaijan (CBA) was fully met. By the end of 2024, the CBA's foreign reserves amounted to $11 billion, as the foreign exchange inflows from oil were sufficient.
According to the economist, there is no doubt that this tendency will continue at least until the second half of this year.
"However, the new US President Donald Trump, during his first presidency, accused OPEC, led by Saudi Arabia, of artificially keeping prices above $60 per barrel. According to Trump, global oil market prices should be below $50. This could happen next year, if not this year. Everything will depend on the course of existing geopolitical conflicts," he explained
Regarding sterilization operations, the economist believes that there will be no particular need for them in the near future. The CBA sharply reduced the volume of sterilization operations in 2024. Overall, the volume of notes issued by the CBA decreased 6.3 times last year, so there is no doubt that the situation will remain the same this year. By the way, the execution of budget expenditures in December 2024 led to an increase in the money supply by 1.7 percent, which is not a significant figure," noted Heydarov.
Economist Eldaniz Amirov said that after Trump became president, the likelihood of the US dollar strengthening and oil and gas prices decreasing increased.
Amirov pointed out that this can also put some pressure on the manat.
"However, it should be taken into account that Azerbaijan's government prioritizes the stability of the manat exchange rate to maintain macroeconomic stability in the country. We see that intensive work has been carried out in this direction over the past few years. Furthermore, in the coming period, both the country’s foreign reserves and various strategic measures will allow for the preservation of the manat’s stability. That is, in the current macroeconomic situation, despite the risks on the global market, we can say that the government will not face difficulties in countering pressure on the manat.
Of course, in all cases,
the final decision will still be up to the government. However, in
the current economic conditions, there is no need to take any
necessary steps regarding the exchange rate of the manat," the
economist said.
To note, as of December 1 of last year, the nominal effective exchange rate of the Azerbaijani manat against foreign currencies was 107.5 points. This is an increase of 2.1 points compared to the previous month, 5.5 points compared to the beginning of the year, and 4.7 points compared to the same period in 2023.
At the same time, the real effective exchange rate of the manat on December 1 of last year was 122.6 points, which is an increase of 2.8 points compared to the previous month, 1.2 points compared to the beginning of the year, and 0.2 points compared to 2023.
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