Fitch Ratings: Azerbaijani government takes necessary measures to prevent manat’s devaluation

“The authorities this week imposed a 20% tax on some transactions where foreign currency leaves the country, in response to manat depreciation following the switch to a floating exchange rate regime last year,” Fitch Ratings has said. “The move reflects the challenge of dual policy goals - preserving the value of State Oil Fund of Azerbaijan (SOFAZ) assets, and supporting the currency to maintain price and social stability. The measures will support the manat and reduce the pressure on buffers, which are a key strength of Azerbaijan's credit profile.” The agency said the government may be reluctant to use funds of SOFAZ to defend the manat “as SOFAZ finances around half of the state budget and is also meant as a fund for future generations”. “Pensions, benefits and public-sector salaries have been increased and VAT on bread and flour removed.” Fitch Ratings quoted Azerbaijani Minister of Finance Samir Sharifov as saying that “the 2016 budget will be revised to incorporate a USD30/b oil price assumption, from the USD50/b in the initial budget, while keeping the benefit and public sector salary rises”.