The devaluation of the Azerbaijani manat has become a focal point of discussion among economists and market analysts, driven by a combination of declining oil revenues, rising inflation, and fluctuating foreign trade balances. In this post, we delve into the factors influencing this trend, aiming to provide a comprehensive overview for those interested in economic developments and currency fluctuations.

Declining Oil Revenues

Azerbaijan’s economy is heavily reliant on oil and gas exports, which account for a significant portion of its foreign exchange income. According to the State Oil Fund of Azerbaijan (SOFAZ), oil revenues have been declining due to reduced production and lower global prices. During the first half of 2024, SOFAZ’s oil revenue from the Azeri Chirag Guneshli field decreased by $342.7 million compared to the previous year, highlighting a concerning trend of diminishing returns from this critical sector.

Rising Inflation Rates

Inflation has been a persistent issue for Azerbaijan, further eroding the purchasing power of the manat. The State Statistics Committee reports that inflation rates have been fluctuating, with recent spikes due to external shocks and increased tariffs on regulated goods. The inflation rate reached 13.9% in 2022 and 8.8% in 2023, which continues to exert pressure on the national currency, prompting calls for devaluation.

Impact on Foreign Trade

The balance of foreign trade has been adversely affected by these economic shifts. The State Customs Committee notes a decrease in exports and an increase in imports, resulting in a diminished trade surplus. In the first five months of 2024, the foreign trade balance decreased significantly, impacting the overall economic stability of the country.

Preparedness of the Banking Sector

Unlike the shocks experienced in 2015, Azerbaijan’s banking sector appears better prepared for potential devaluation today. The Central Bank of Azerbaijan (CBAR) highlights improved capital reserves and risk management strategies as key factors enhancing the sector’s resilience against currency fluctuations.

The combination of declining oil revenues, rising inflation, and a shifting foreign trade balance creates a complex economic environment in Azerbaijan. As the nation continues to adapt to these changes, monitoring these factors will be crucial in understanding the future trajectory of the manat.

For those interested in further insights into Azerbaijan’s economic landscape, exploring the resources provided by SOFAZ, CBAR, and the State Statistics Committee will offer valuable data and analysis. As the situation evolves, staying informed about these key indicators will be essential for anyone invested in the region’s economic future.stability and growth. For a detailed exploration of the factors and data discussed, refer to the full report.