The oil-rich country's central bank devalued the manat on Saturday by 33.5 percent to the dollar and by 30 percent to euro.

   

"Sharp depreciation of currencies in neighbouring countries started to affect us. At the same time declining oil price also affected our revenues negatively," Aliyev said in a special address by TV late on Tuesday.

   

"Appreciation of manat had a negative impact on economic development. That's why the decision was made to devalue manat a bit. It was necessary."

   

The central bank abandoned the manat's dollar peg on Feb. 16 and began using a dollar-euro basket to manage the exchange rate after a nearly 60 percent drop in crude prices since June and Western sanctions against Russia over its annexation of Crimea. 

   

Azerbaijan has been less affected than other former Soviet states by Russia's economic problems but its economy is heavily exposed to price swings on global energy markets. [O/R]

   

The manat was set at 1.0502 to the dollar and 1.1914 to the euro, down from last Friday's 0.78 and 0.89 manats respectively. The manat has been pegged at just over 0.78 per dollar since mid-2011.

   

Aliyev said about $500 million had been sold daily on the market after the bank's decision to abandon the manat's dollar peg.

   

"Before the rate was corrected our currency reserves, the central bank's reserves started to decrease ... If such situation continued, the currency reserves could have reduced significantly. Therefore, we decided to devaluate the manat," he said.

   

The central bank has spent hugely in recent months defending the manat, eating into its foreign-currency reserves. Those fell $1 billion in January to $12.68 billion and by nearly $1.13 billion in December.

   

Aliyev said he ordered to stop any attempts to hike prices artificially.

   

"The monitoring is going on and very serious measures will be taken against those, who are trying to increase prices artificially," he said.

   

Analysts say the South Caucasus republic's 4.4 percent economic growth target for this year is at risk because it envisages oil at $90 a barrel. Brent crude is now trading near $60 a barrel.