Azerbaijan limits foreign currency outflows to prop up manat

PanARMENIAN.Net - Azerbaijan imposed some limits on foreign currency outflows in a package of measures adopted by parliament on Tuesday, January 19 to prop up the oil producer's depreciating manat currency, Reuters reports.

Rising prices have stirred protests rarely seen in a country where oil money and well-equipped security forces have long ensured public loyalty to President Ilham Aliyev.

The manat has lost about a third of its value against the dollar in the past month and the central bank has burned through more than half its foreign currency reserves, which now stand at about $5 billion, trying to protect its value from low oil prices. Oil and gas account for 75 percent of the Azeri state's revenues.

Azerbaijan's 10-year dollar bond, which matures in 2024, rose 0.45 cents to trade at 90.08 cents as the government acted to contain the crisis. The bond's yield premium over safe-haven U.S. Treasuries narrowed 11 basis points to 582 bps.

Central bank chief Elman Rustamov said the government would impose limits on foreign currency outflows and introduce a 20 percent tax on currency exports related to direct investment, the purchase of real estate or securities abroad.

No limits would be imposed on currency exports related to education, medical treatment or outflows relating to court decisions, Rustamov told parliament's economic policy committee, according to Reuters.

Other measures would remove the insurance limit on deposits held in local banks and a 10 percent tax on interest paid on retail deposits from February 1. Rustamov said the changes would be introduced for a three-year period.

Deposit insurance currently covers retail deposits of up to 30,000 manats ($18,700) with interest capped at 12 percent annually.