Azerbaijanis Reel As Currency Tanks

Your browser doesn’t support HTML5

WATCH: Desperation on Baku streets

A massive tumble in Azerbaijan's currency has shuttered shops and sent people scrambling to convert their manats into foreign currency or durable goods.

"This is such a miserable situation for the whole nation," a Baku man told RFE/RL's Azerbaijani Service. "Everyone wants to buy dollars and only a few [banks and exchange officies will] sell.... There are almost no dollars left at exchange points."

The Azerbaijani Central Bank's decision to float the country's currency on December 21 led to the loss of some one-third of the manat's value -- from 1.05 to 1.55 manats to the dollar.

The drop led stores and even entire shopping malls across the country to close as people rushed to buy things before store owners raised their prices.

At Baku's Bina shopping market, a shoe-store employee told RFE/RL that the shop had to close or it would lose money.

Others wanting to buy dollars and euros found many exchange offices closed or not selling hard currencies, while several banks put a $500 limit on how much each person could exchange for their manats.

"No bank wants to convert the dollar into manats," another Baku man told RFE/RL. "We don't know why. This is such a disaster for us. How come they decided to bankrupt people in one night?"

Several exchange offices in Baku were selling the dollar for between 1.56 and 1.59 manats within hours of the December 21 move, already higher than the official rate.

The bank said in a statement the decision to float the manat was made to "protect the country's foreign reserves."

Economists and opposition leaders were quick to criticize the government for allowing the manat to fall so dramatically.

"Azerbaijan has moved to a floating exchange rate, but someone forgot to teach it how to swim," said Natiq Cafarli, an economist and member of the the Republican Alternative opposition group.

"They should have taught it how to swim before putting it in the water."

Ali Karimli, chairman of the Azerbaijan Popular Front Party, accused the government of "killing" the national currency.

"It was killed by a self-centered, corrupted, and incapable government," Karimli said. "There will be price hikes [and] the salaries, pensions, savings -- everything we have in manats is now practically devalued by 55 percent."

It marks the second time this year the manat has abruptly lost significant value due to government actions. In February, a devaluation also led to the currency losing more than one-third of its value against the dollar.

Banking expert Akram Hasanov, who works at the Baku-based IJS law firm, blames the Central Bank and its first devaluation for setting the currency up for "yet another devaluation."

"Many other countries have devalued their currencies in recent years, but nowhere has there been the serious damage to the people and entrepreneurs as [in Azerbaijan]," said Hasanov.

He added that the devaluation will lead to the collapse of many banks in Azerbaijan.

"But [the bankruptcies of the banks] will not affect the bank owners and managers, it will be ordinary depositors [that will suffer]," Hasanov said.

Just weeks before the February devaluation, Azerbaijani President Ilham Aliyev called the manat "one of the most stable currencies in the world" and encouraged foreign nationals and companies to keep their money in the manat.

Economists say Azerbaijan's float of its currency was caused by the low global price of oil. The government in Baku is heavily dependent on oil and natural-gas exports for its state budget.

The price for a barrel of Brent crude oil was selling for $36.10 on December 21, about 33 percent of the price it sold for 18 months ago.

Moody's credit-rating service predicted on December 21 that Azerbaijan's budget deficit would reach 9.2 percent of gross domestic product this year.

The low energy prices in 2015 had forced energy-rich Russia and Kazakhstan to also cut their currencies loose -- Astana earlier this year, Moscow in 2014 -- and allow them to trade freely on the market.

Both the Russian ruble and Kazakhstan's tenge are currently at near record lows to the dollar.