Azerbaijan moves to tighten currency controls as crisis rages

The steps proposed by central bank Governor Elman Rustamov on Tuesday range from a 20 percent fee on foreign exchange taken

out of the country for investment abroad to fully insuring bank deposits. Azerbaijan last week limited the sale of foreign

currency to bank offices and exchange booths at airports and hotels. 

The manat has lost more than 50 percent against the dollar in the past year and is trading at a record low after the

central bank relinquished control of its exchange rate on Dec. 21, prompting many Azeris to withdraw savings.

"These laws will help maintain economic stability in the country,” Rustamov was cited as saying by the news service APA.

Speaking at an emergency meeting of parliament in the capital, Baku, Rustamov also proposed to exempt interest on all bank

deposits and dividends from taxes.

The third-largest oil exporter in the former Soviet Union moved to a free float last month after burning through more than

half of its foreign-currency reserves as its economy reeled from the recession in Russia and plunging energy prices.

President Ilham Aliyev on Monday promised measures to restore trust in the national currency and consolidate the banking system to spur economic growth.

Aliyev told his government to look into opportunities to borrow more money abroad and prepare a "comprehensive” privatization plan to draw in foreign and domestic investors, according to comments on his website. The Azeri leader also pledged to trim government institutions and step up the fight against corruption.

The central bank governor also said Azerbaijan may allow repayment of dollar loans of as much as $5,000 at a pre-devaluation exchange rate of 1.05 manat per U.S. currency. The plan to subsidize borrowers may require $250 million, he said. 

The manat was down 3.4 percent at 1.6350 against the dollar as of 12:53 p.m. in Baku.

The changes proposed by the central bank governor are likely to be approved by parliament, which is dominated by the

ruling New Azerbaijan Party and lawmakers loyal to the government.

 

(Bloomberg)