CBA should correct its rate policy

On Monday, the official rate of the euro towards the manat in Azerbaijan has reached the very lowest level for the last eight years. "The official exchange rate of European currencies towards the manat was established on the level of 95,6 kopecks June 7, which is the lowest level since Oct. 26, 2002," chairman of the Center for Economic and Social Development Vugar Bayramov said.

Then, one euro was equal to 95,3 kopecks (4766,98 manat). This year, the euro has fallen in price compared to the manat by 17,4 percent. Since early 2010, the euro fell from 1.1575 to 0.9561 manat. This testifies that every 100 euros lost at least 20 euros for the last five months.

The rate of manat towards the dollar remains constant amid the fall of the euro towards the manat. Strengthening of the rate of manat has led to the emergence of new proposals to change the rate policy of CBA", Bayramov said.

He thinks that today the immutability of the manat towards the U.S. dollar and depreciation of the euro towards the U.S. dollar caused the strengthening of manat.

"Strengthening of the rate of manat towards the euro reduces the export capacity of local Azerbaijani producers. So, there is a need for the central bank to revise its exchange rate policy, and gradually come to mitigate devaluation, Bayramov said. A depreciation of the manat towards the U.S. dollar can stimulate non-oil sector," he said.

The expert thinks that the "soft exchange rate policy will not lead to loss of confidence in the manat.

"Taking into account that the state revenues are derived principally from the proceeds from the sale of oil, which is a strategic product and is sold for dollars, it enables the government to have additional financial resources", the expert said. Azerbaijan is the only country conducting a very strong exchange rate policy among the CIS countries, he said.