16:50 - 16.03.2020

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March 16, Fineko/abc.az. Executive director of the Center for Analysis of Economic Reforms & Communications Vusal Gasimli has commented on the stability of the manat exchange rate, despite global shocks.

According to ABC.AZ’s data, Gasimli said that the exchange rate calculated on the basis of purchasing power parity is the local currency value required to buy a product in the market of another country in the amount that can be bought for $1 buy in the U.S.

According to Gasimli, a product purchased in the U.S. for $1 is a fee required for a purchase in the local market.

Gasimli pointed out that for Azerbaijan this figure, according to statistical data provided by the World Bank for 2018, is $0.25: "In other words, a product that can be purchased for $1 in the U.S., in Azerbaijan you can buy for $0.25. After comparing each indicator with the "international dollar" indicator on purchasing power parity for comparative analysis by country, you can see the real difference. According to WB calculations, in 2018, 1 "international dollar" in Azerbaijan was estimated at $0.25, Belarus - $0.25, Kyrgyzstan, Georgia and Ukraine - $0.29, Kazakhstan - $0.31 and Russia - $0.39. The devaluations that occurred in these countries under the influence of recent global shocks have strengthened the real effective exchange rate of the manat.

If in 2000 the real effective exchange rate of the manat was 100 as a benchmark, then at the beginning of 2020 this indicator was at the level of 93.3. In other words, the real effective exchange rate of the manat at the beginning of this year was below the equilibrium point. However, given the recent devaluations of currencies of Azerbaijan’s trading partners and the stability of the manat, the US dollar amid the real effective exchange rate of the manat is rising to the point of equilibrium.

The growth of the real effective exchange rate of the manat further strengthens Azerbaijan's position on the CIS area on terms of minimum pension, average pension, minimum wage and average salary. On the other hand, to regulate the impact of raising the real effective exchange rate of the manat on the competitiveness of the economy, it is necessary to continue institutional reforms, further improve the competitive environment, develop human capital and enter markets."