Azerbaijan's Parliament Passes Measures To Support Troubled Currency

Azerbaijan’s parliament has approved a package of measures aimed at coping with an economic and financial crisis caused by plunging energy prices.

Lawmakers approved the plan proposed by central bank chief Elman Rustamov on January 19. It follows protests against poverty across the oil-rich South Caucasus state, where a steep decline in the value of the national currency, the manat, has sent consumer prices rising.

The crisis plan includes a 20 percent fee on foreign exchange taken out of the country for investment abroad.

From February 1, the insurance limit on deposits held in local banks would be removed, and a 10 percent tax on interest paid on bank deposits lifted.

These measures “will help maintain economic stability in the country,” Rustamov told parliament, which is dominated by the ruling New Azerbaijan Party and lawmakers loyal to the government.

Global oversupply has led to a more than 70 percent collapse in oil prices over the last 18 months, dramatically affecting the currency and budget of Azerbaijan and other energy-dependent nations.

The manat has lost about one-third of its value against the dollar since December, when the central bank relinquished control of its exchange rate in a move that prompted many Azeris to withdraw their savings.

In an effort to try to support the manat, Azerbaijani authorities have spent more than half of the country’s foreign currency reserves and last week limited the sale of foreign currency to bank offices and exchange booths at airports and hotels.

Public anger has mounted, with Azerbaijanis taking to the streets across the country to protest worsening economic conditions.

On January 15, at least 55 demonstrators were detained after clashes with police in the town of Siyazan, north of Baku. Several arrests also took place during a rally in the northeastern Quba district.

A number of local officials and police officers were detained in the Fuzuli district for letting a rally take place there.

Authorities blamed opposition parties for organizing the "illegal" rallies and detained regional leaders of the Popular Front (AXCP) and Musavat parties. The opposition denied the accusation.

On January 18, smaller rallies were held in the Astara and Calilabad districts.

President Ilham Aliyev signed a decree on January 18 on increasing the minimum pensions and salaries of state employees by 10 percent from February 1 in a country where the average monthly salary is 460 manats ($287).

Aliyev told the government to prepare a “broad” privatization program that would draw in foreign and local investors and to look into opportunities to borrow more money abroad.

He also promised measures to consolidate the banking system.

With reporting by Reuters and Bloomberg.com