Azerbaijan Currency

[Geralyn]

Coinswere issued in denominations of 5, 10, 20, and 50 gapiks, dated 1992 and 1993. Although brass and cupronickel were used for some of the 1992 issues, later issues were all in aluminium. These coins were rarely used in circulation.

On 1 January 2006, a new manat (ISO 4217 code AZN, also called the "manat (national currency)") was introduced at a ratio of 1 new manat to 5,000 old manats. From 1 October 2005, prices were indicated both in new manats and in old manats to ease the transition. Coins denominated in qəpik, which had not been used from 1993 onward due to inflation, were reintroduced with the re-denomination. The former manat (ISO code 4217 AZM) remained in use through to 31 December 2006.[3]

The new manat was initially assigned the code AYM on being added to the ISO 4217 standard on 1 June 2005, with an effective date of 1 January 2006.[6] However, this was removed and replaced by AZN on 13 October 2005 as it did not comply with the ISO 4217 currency coding standardization rules (which state that currency codes must begin with the ISO 3166-1 alpha-2 code for the relevant country).[7]

Azerbaijan in the 2000s: a stable middle-income oil-driven economy. The country flourished, after 15 years of increasing oil prices and high economic growth, benefiting from a a stable, pegged exchange rate. This also led to high levels of dollar lending. Despite wealth not being equally shared among the population, the economy was growing and continuously attracting foreign investments.

This situation lasted until 2014, when the global oil crisis turned into a national currency crisis. The sharp declines in global oil prices were disrupting all sectors of the local economy. Ultimately, this led to the release of the peg and a doubling of the exchange rate within 12 months.The devaluation of the manat and the general economy situation had a devastating impact on the financial sector:

In this context, local currency borrowers and lenders were much better able to sustain the downturn. Indeed, data for the financial sector shows that default rates on dollar loans were more than double than those on manat loans. Banks and microfinance institutions with the lowest levels of dollarization were better able to sustain the crisis and to recover.

Along the same lines, TCX shareholders and their clients who had previously made the strategic decision to lend/borrow in local currency were protected from the steep currency devaluations that occurred in 2015 and displayed a better resilience to the financial sector crisis.

In 10 years of activities in Azerbaijan, TCX has hedged over USD 360 million worth of development finance loans to MFIs and SME banks. By converting these loans into local currency, thousands of enterprises and households have been shielded from currency volatility, as TCX has absorbed all of of currency depreciation for these hedged loans. Please read more on Azerbaijan in our impact report.

"This is such a miserable situation for the whole nation," a Baku man told RFE/RL's Azerbaijani Service. "Everyone wants to buy dollars and only a few [banks and exchange officies will] sell.... There are almost no dollars left at exchange points."

Others wanting to buy dollars and euros found many exchange offices closed or not selling hard currencies, while several banks put a $500 limit on how much each person could exchange for their manats.

"It was killed by a self-centered, corrupted, and incapable government," Karimli said. "There will be price hikes [and] the salaries, pensions, savings -- everything we have in manats is now practically devalued by 55 percent."

It marks the second time this year the manat has abruptly lost significant value due to government actions. In February, a devaluation also led to the currency losing more than one-third of its value against the dollar.

Just weeks before the February devaluation, Azerbaijani President Ilham Aliyev called the manat "one of the most stable currencies in the world" and encouraged foreign nationals and companies to keep their money in the manat.

The low energy prices in 2015 had forced energy-rich Russia and Kazakhstan to also cut their currencies loose -- Astana earlier this year, Moscow in 2014 -- and allow them to trade freely on the market.

Despite near-total government control over the media, RFE/RL's Azerbaijani Service has built a high-impact social-media presence in Azerbaijan and a reputation as a leading source of independent news.

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Azerbaijan firstly issued its own currency in 1919. Strive of young Azerbaijan Democratic Republic to introduce its national currency in the international arena was expressed that the highest denomination of 500 manats was written in international French language.

The next time the currency was issued in 1920 with the name of Azerbaijan Soviet Socialist Republic, but later in 1923 Azerbaijan became part of Transcaucasian Soviet Federal Socialist Republic and the control over banking system of Azerbaijan moves to Moscow. In 1936, according to the Constitution of USSR, Azerbaijan joined the Soviet Union and ruble became the only currency.

The new page in the history of currency circulation in the country began upon restoration of independence of Azerbaijan. The President of Republic of Azerbaijan issued a decree on national currency on 15th of July, 1992.

National currency was put into circulation on 15th of August 1992, and from 1st of January 1994 the head of the country Heydar Aliev had made the national currency the sole legal circulating medium throughout the country.

Azerbaijan currently issues banknotes with denominations of 1,5, 10, 20, 50 and 100.

Manat is equal to 100 qapiks. There are metal coins in denominations of 1, 3, 5, 10, 20 and 50 qapiks. Designer of the modern Azerbaijani manat is Robert Kalina from the OeBS (Osterreichische Banknoten und Sicherheitsdruck GmbH), the developer of a modern Euro design. Technical parameters of a new generation banknotes are developed with technical assistance of National Bank of Switzerland. Banknotes of a new generation has four-pillar protection system, with Level I being determined by the population without any special equipment.

Banks in Azerbaijan work 09.00-09.30 to 17.30 with some banks working till late evening. Currency can be exchanged in banks, hotels and numerous exchange points. They are often open round-the-clock (in Baku, big cities and airports). Some shops have their currency exchange offices. The currency rate in banks and exchange offices differs insignificantly.

This master thesis aims to examine an empirical investigation of the impact of Azerbaijan national currency devaluation on the banking sector of Azerbaijan. We will identify how currency devaluation affects the performance of the banks in Azerbaijan. In recent decades, several developing countries have confronted volatility in national currency requiring major reforms in the financial sector and economy. Devaluation is considered a tool of central banks to regulate the national currency. The monetary authorities apply for devaluation in terms of enhancing the trade balance of countries. Macroeconomic equilibrium, price stability, financial and banking stability, sustainable economic growth, or sustained economic growth reflect the uppermost targets of monetary policy.

On the other hand, this study will determine the profitability of banks in Azerbaijan and analyze the devaluation impact for 2013-2018 years. However, the price shifts of oil-gas resources in 2014 sketched the financial institutions severely in Azerbaijan. In this thesis, the modification of the dependent and independent variables of the regression model will be tested by using the Panel Data Analysis Method.

Moreover, I decided to research this topic for my thesis, as my further plans are to continue my PhD degree and improve my career in this area. In this thesis, I will introduce a brief overview of the banking sector in Azerbaijan, and the effects of two devaluations by the Central Bank of Azerbaijan Republic in 2015. This thesis will check the effects of exchange rate fluctuations in Azerbaijan banking sphere by running balanced panel data for the period 2013-2018 years. The empirical findings of this study suggest that the changes in a foreign exchange rate have a statistically significant and adverse impact on the profitability of Azerbaijan banks.

The AZN 200 note will be the largest to go into circulation since the national currency was rebranded and redesigned in 2006. The American company Crane Currency, a worldwide banknote supplier headquartered in Boston, designed the new Azerbaijani note. The Munich-based Giesecke & Devrient Company, which provides banknote and securities printing, smart cards, and cash handling systems worldwide, is responsible for printing the new bill.

The Central Bank has also unveiled commemorative gold coins that are being minted to honor the 95th birthday of former Azerbaijani President Heydar Aliyev, and the 100th anniversary of the creation of the Azerbaijan Democratic Republic, which was established in 1918. The commemorative coins are being struck at the Royal Mint courtyard of the British royal family.

The Azerbaijani manat made its first appearance during the 23-month-long existence of the Azerbaijan Democratic Republic, which had been freed from imperial Russian rule on May 28, 1918 and lasted until the Soviet occupation on April 28, 1920.

Some bank branches in Azerbaijan's capital imposed limits Thursday on the amounts of foreign currency they would sell to customers, who in some places lined up outside to convert their cheapening manats.

Authorities have reassured citizens that the slide in the currency will not continue much further, although President Ilhan Aliyev said Thursday that no new measures were planned to stabilize the manat, Russia's RIA news agency reported.

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