National currency reform: manat as one of the valuable currency of the world

Since 2004, one of the important prerequisites in the start of a new stage of economic reforms in Azerbaijan, then becoming the world\'s fastest growing economy was the renewal of the national currency, the manat.

In 2005, the start of monetary reforms that aimed for long-term prospects in terms of the socio-economic development of Azerbaijan, preservation of real money incomes of population, reducing the risk of high inflation, to encourage foreign investment soon began to give positive results.

At present, Azerbaijan is one of countries of the world having most stable and valuable currency unit in the world. The exchange rate of the national currency- manat was continuously strengthened against world\'s leading currency, the dollar, the euro and the pound sterling. During the hard global financial crisis covering the period 2008-2010 Azerbaijan was able to keep a steady its national currency’s course. As a result, the country\'s population did face a serious damage as the resold of global financial crisis.

After the release of a new national currency in circulation it lived for a time period of quite. As a result of the ongoing economic crisis in the early 90-es manat fell rapidly in value, so the country has had an impact on the processes occurring in the world and neighbouring countries. Finally, in 1996, stabilization of the currency rate against the U.S. dollar started. In 1999 manat was strengthened for 15 percent against the dollar. Subsequently as a result of the strict monetary and credit policy carried out by the Central Bank One ($ 1 by 4940.) The currency-based monetary reform was begun in the country.  This trend continued until the end of 2004. On the basis of the decree of the President of the country in 2005 the denomination has been carried out.

According to Decree of President dated February 7, 2005 on “Denomination of the nominal value of money” since January 1, 2006  1 (one) new manat was equal 5 000 old manat. The Central Bank has announced that the new manat would be equal to the dollar in rate. Within one year after the beginning of the monetary reform both the old and the new national currencies were in circulation in parallel. Finally, from January 1,2007 the transition in the country to the new manat was fully completed. However, there was no limit in the process of change of AZM to AZN and the process continued in the next few years, albeit in a limited way. Thus, the process of denomination was carried out in Azerbaijan in a soft manner, and completed without any negative impact on the economy and the country\'s currency policy.

The main purpose of the emission of the new generation banknotes in circulation at denomination process was formation of exchange rate of new manat to world leading currencies, to bring a design of national currency signs, its protection, face structure into compliance with international standards, to optimize the magnitude of the exchange rate and prices, to simplify the accounting and settlement system. At the same time, the  transition to new generation banknotes  had ensured clear expression of national and historical traditions, improve money circulation in the country, as well savings from state expenses in cash generation, transportation, storage and processing. Emission of new currency signs meeting the highest international standards in circulation in Azerbaijan was recorded in history as recent important national projects.

At the moment, for the face value  manats with exception of British pound sterling, the Japanese yen, the Kuwaiti Dinar, Latvian lat is considered as the world’s  and  the region\'s most valuable currency. At the same time, after the new manat was introduced into circulation it continuously strengthened its exchange rate against other leading currencies. The data released by the Central Bank Official on official exchange rate of foreign currencies shows that at the first working day of the year 2006, that is, at 1st day of putting the new manat into circulation 1 USD was equal to 0.9184 manat. In 2012, this figure amounted to an average of 0.786 manats. Thus, during this period the dollar devalued before manats for 14.4%, the euro for 4.5% (from 1,0882 AZN 1.0291), the pound  for 21.9% (from 1,587 to AZN 1.2403), and ruble for 18.2 % (from  0.0261 to 0,0319 AZN).

Compared to national currency of CIS countries the manat, generally, has no competitor.

For comparison: presently one Belarusian ruble is equal to  0.00009 manat, the Georgian Lari to 0.475 manat, the Kazakh tenge to 0.0052 manat,   Kyrgyz som to 0.0162 manat, Moldova leyi to 0.064 manat, the Uzbek som to,0004 manats, Russian rubles to 0,025 manats, Tajik somoni to 0.164 manats, Turkmen manat to 0.27 manats,  Ukraine Hryvna to 0.096 manats, Armenian dram to 0.0019 manat. In comparison with other countries having the close trade relation the difference in favour of manat. Thus, one dirham of the United Arab Emirate (AED) is equal to 0.213 AZN, one Chinese yuan to 0.12 AZN, one Iranian rial to  0.00006 manat, Turkish Lira to 0.43. (Important note: In view of small increase and decrease in exchange rate of manat compared to  currencies of foreign currencies minor changes are possible in figures done from time to time).

According to the report of the Central Bank on monetary–loan policy, remaining manat’s exchange rate as stable  allows to prevent increase of inflation,   the burden of external debt of economic subjects and dollarization, and in general prevention of real money incomes of the population .

However, to prevent the significant strengthening of the exchange rate and thereby avoid to neutralize negative impacts,  sterilization of foreign exchange on the competitiveness of non-oil sector, the Central Bank  had neutralized 639.4 million in the I semi-year  first six months. As a result, the moderate rate of exchange against the U.S. dollar during the period, 0.1% of the consolidated total. The Central Bank stated that the stability of the exchange rate of the national currency had impacted positively on macroeconomic stability. During the year, the bilateral exchange rate of the Central Bank ensured the stability of the national currency. But the real multilateral exchange rate of manat was devalued, which is good in terms of improving the competitiveness of non-oil sector.

Thus, having one of the world\'s most robust national currency Azerbaijan has strengthened further its economic position, and has become an attractive country for foreign investments. As stated by country President Ilham Aliyev Azerbaijan\'s economic potential and industrial capacity allows to retain manat as strong as today.