Azeri banks halt or curb forex sales as dollar demand soars

06.09.2016 09:30

Some Azeri banks have halted or severely limited foreign currency sales as businesses and customers have sought to ditch the manat en masse, raising fears of another painful devaluation in the Caucasus republic's currency.

On Monday, the manat traded at 1.6363 against the dollar AZN=, its weakest since mid-March. On the black market, the dollar was being sold for two manats.

Out of six banks visited by a Reuters reporter in the Azeri capital of Baku, three have halted forex sales and three have limited them to up to $100 per person - far below the existing $500 cap imposed by the central bank.

"I have been selling chandeliers for 10 years," said Akif Shukyurov, a Baku merchant. "I need to pay for supplies (in dollars). And we sell in manatas and I cannot convert the currency because there are no dollars."

Increasing dollar demand in recent months has dented the central bank's efforts to restore faith in the manat after two devaluations last year halved its value against the dollar and spurred unrest in Azerbaijan, a major oil and gas producer.

Slumping oil prices have also put pressure on the manat, as three-quarters of Azeri state revenues come from energy.

The central bank said late in August that the higher dollar demand is seasonal, with firms needing to repay forex debt, and has pledged to support

Azeri banks and the manat. It has also said forex sales from the SOFAZ wealth fund would continue as well as central bank auctions.

But auctions are held only twice weekly and are limited to $50 million, while demand has grown to 10 times that volume, according to central bank figures.

Central bank officials have been unavailable for comment.

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