Feature: Falling oil prices pinch Azerbaijan

To many Azerbaijanis, Feb. 21, 2015 has generally become known as the "Black Saturday" when Azerbaijan sharply devalued its national currency manat and set its official exchange rate at 1.05 against the U.S. dollar.

On that day, the manat lost 33.5 percent against the dollar.

Azerbaijan -- an oil-rich Caspian country relying on hydrocarbons for more than 90 percent of its exports and 65 percent of its state budget, was forced to devalue the manat due to the plunge of global oil prices.

The Central Bank of Azerbaijan (CBA) claimed that the devaluation aims to diversify the economy, strengthen its compatibility with international markets, enhance the country's export potential and avoid rising debt.

For thousands of Azerbaijanis, like 61-year-old high-school teacher Elkhan, the manat's precipitous plunge swallowed more than their savings. It popped a bubble of belief that Azerbaijan was protected from the kind of financial instability that has shaken other Eurasian states.

Only one day after the devaluation of manat, people swarmed exchange bureaus across the country seeking to buy dollars. The surge prompted some bureaus to stop selling dollars.

All of these started with the collapse of the Russian ruble as Western players, including the United states and the European Union, imposed economic and administrative sanctions on Russia for its policy toward Ukraine.

Plunging oil prices and economic sanctions against Russia affected the economies of neighboring countries, particularly in the Caucasus and Central Asia region.

Azerbaijani President Ilham Aliyev said that devaluation of the manat was a necessary measure as slumping oil prices and an economic crisis in neighboring countries put pressure on the currency.

"Sharp depreciation of currencies in neighboring countries started to affect us. At the same time declining oil prices also impacted our revenues negatively," Aliyev said in a special address by TV on Feb. 24.

Azerbaijan imports most of its retail food items, prices of which have already increased well over 30 percent, local media reported.

Speaking on condition of anonymity, a 44-year-old Baku clothes shop owner told Xinhua that he had no choice but to increase prices.

"What is happening is a nightmare that we could not even have imagined a year ago," he said.

People in Azerbaijan believe that the fall of the manat will have a bad impact on their purchasing capacity, and cause inflation and shortage of goods, which has already been observed at the marketplace, particularly in markets of imported products.

Several banks of the country have suffered significant losses due to the devaluation of the manat. Local experts said that the devaluation will adversely affect the capitalization of the banking sector and strengthen dollarization of the economy. Endi