Azerbaijan considers tighter currency controls to staunch losses

The manat has lost 33 percent of its value against the dollar in the past month and the country has burned through more than half its foreign currency reserves trying to defend it against the effect of falling oil prices.

Speaking at a meeting of the government, Aliyev said parliament would convene in an extraordinary session on Tuesday to debate government proposals to strengthen regulations on the currency market, state TV reported.

There were no details on which regulations would be tightened, but the parliamentary session's agenda for Tuesday includes items on regulating the currency market, insurance of deposits and several changes to the tax and administrative codes. Parliament is dominated by Aliyev loyalists.

Aliyev said the government had prepared a large-scale privatisation plan with the participation of local and foreign experts, while proposals on the recovery of problematic banks were also under consideration.

He said that measures on deposit insurance and the issuance of state bonds would also help to support the currency. He also signed a decree on increasing the salaries of state employees by 10 percent from Feb. 1. The average salary in Azerbaijan is 460 manats a month($287).

The State Oil Fund of Azerbaijan (SOFAZ) sold a total of $193.9 million on the foreign exchange market on Monday in a bid to prop up the weakening manat.

It was the fund's third intervention this year. It has sold $539.9 million in total so far, while $100 million was sold by the country's central bank.

Azeri state oil company SOCAR said it had offered to buy back its outstanding Eurobonds worth up to $500 million and maturing in 2017.

The cost of borrowing for Azerbaijan's government has gone up as investors perceive the risk of holding the country's assets to have increased. Buying back the Eurobonds could save Azerbaijan money in the longer time.

 

(Reuters)