21 December 2015, Baku: Oil prices have dropped more than threefold since June 2014 due to the complex forces that affected the global economy, recent decisions of leading central banks, increase of supply in world energy markets, weak economic growth in a number of large oil importing developed countries, and other global factors.

All these developments affected the Azerbaijan’s economy which is closely integrated to the global economy. Surplus of the country’s foreign trade balance and other sources of foreign exchange have drastically deteriorated.

Manat was devaluated in February 2015 given serious pressures on the country’s FX market and the exchange rate of manat, followed by the adjustmentof the economy, the FX market and the exchange rate of manat to oil prices of $50-55.

However, rapid declines in oil prices since end-July 2015 put again significant pressure on the FX market and the exchange rate. In the meantime ongoing devaluation in partner countries has negative impact on the international competitiveness of the national economy. As a result of recent increase in volatility, depreciation of national currencies of a number of trade partners exceeded 100%.

The current circumstance makes it inevitable to adjust the FX market and the exchange rate to new oil prices.

Taking into consideration the intensification of long lasting external economic shocks, the Management Board of the Central Bank decided to adopt floating exchange rate regime from 21 December 2015 in an attempt to improve the balance of payments, maintain an adequate level of strategic reserves and improve international competitiveness of the national economy. After this decision the exchange rate of manat will be determined by the fundamental factors that affect the supply and demand in the FX market. The CBA participation in the forex market will be in line with this exchange rate regime.

In the meantime, extensive measures will be taken to improve bank soundness, the capital and liquidity levels, the deposits’ insurance system in order to protect people and others who have funds on deposit with banks.