The surge in dollar sales by the State Oil Fund of Azerbaijan (SOFAZ) has raised questions about the stability of the manat and the potential implications for Azerbaijan’s economy. With a dramatic increase in November’s currency sales compared to October and a more than two-fold rise in sales for the first 11 months of 2024 compared to the previous year, concerns about the manat’s future are surfacing.

This situation invites comparisons to 2015 when currency sales by the Central Bank led to devaluation.

However, according to Azerbaijani economist Dr. Elshan Bagirzadeh, the current context is different. In his insight to Azernews, he explained, "The sales of the oil fund are mainly related to transfers from this fund to the budget".

"Nevertheless, a certain decrease was also observed in the Central Bank's foreign exchange reserves during the year. If the manat had been freely traded against the dollar, we would undoubtedly have seen some increases in the dollar exchange rate. However, as you know, this is not the case, and Azerbaijan has tied its manat to the dollar at a fixed exchange rate, which we call 'pegging' in English. Therefore, the appreciation of the dollar in Azerbaijan depends more on the government's decision than on economic processes."

He continued, "It may be asked whether the government currently has sufficient reserves and capabilities to maintain this exchange rate? I can say that it does. At the same time, the government can refuse to maintain this exchange rate if it wants. Because there are certain economic grounds for this."

Dr. Bagirzadeh also pointed out the crucial role that global oil prices play in this equation: "I believe that everything will depend on world oil prices for the next year. Frankly, I do not predict that world oil prices will continue at high levels during the Trump era, other things being equal. It is also important to know that if there are serious price drops in the oil market, it will be difficult for the Azerbaijani government to maintain the current dollar exchange rate."

This raises a critical question: could SOFAZ’s record-high currency sales signal a potential shift in Azerbaijan's monetary policy? For now, the manat's fate remains inextricably linked to oil market trends and government decisions.