Manat or dollar that is the question

By: Nigar Orujova

The devaluation of the manat which happened in Azerbaijan in February still very much bother Azerbaijanis as they worry about their abilities to take on loans and business credit lines. Many people are wondering whether or not they should or can take on additional credits.

Currently, Azerbaijanis buy electronic and properties on credit, making the procedure very popular.

The update of the exchange rate of manat that put it at the level of 1.05 against the U.S. dollar, compared to 0.78 earlier, made many banks reconsider their conditions for granting loans.

At this time, the bank takes into account both its own interests and the public interest, to make it profitable for the population to take a loan while securing the bank some cash reserves.

Earlier, the Deposit Insurance Fund increased the maximum rate of interest on insured deposits from 9 to 12 percent. This ensures the safety of cash deposits – the money people deposit onto their saving accounts.

The population of Azerbaijan should decide in which currency to take on credit depending on their needs, says Oktay Hagverdiyev, expert economist, former Deputy Minister of Economy.

“It all depends on the purposes for which the loan is taken. If the purchased goods are imported from abroad, then, of course, there is a need to take a loan in dollars. If a loan is needed to buy something in the country, it should be taken in manats, respectively,” he said.

The expert believes the situation is the same with business credit.

“If a legal person takes a loan for the construction of the plant for example, he or she will have to import equipment and technology from abroad, so it will be better to take the loan in foreign currency. However, if the products are manufactured in Azerbaijan, it is better to take [the credit] in manats,” Hagverdiyev stressed.

“In general, depending on the situation, the loan can be combined – part in foreign currency, and other part in manat,” he added.

Speaking about deposits, the expert said, if used in the country, they should be better kept in manats, as they will be converted into national currency in any case.

The fact should also be noted, that Azerbaijani banks have lowered interest rates on loans in local and foreign currency in January.

SOURCE: AZER NEWS