“Market Intervention” is a Misnomer
It’s a sad fact of oil economics that once the black gold is discovered, most of the time all your resources go to everything about oil. From the most recent Asian Development Bank outlook:
Growth prospects hinge on oil.
Basically, the majority of growth in Azerbaijan is because of oil. Nothing earth-shattering here. The report gets a little bizarre, though. I’m not sure if the ADB folks aren’t paying attention, but the Azeri Manat (AZN) is pegged to the dollar. That’s hardly what I would call “heavy market intervention” by the Central Bank of Azerbaijan. That’s the opposite of market intervention. Since I’ve been here, it’s been ~.80 Manats for one dollar. If the market was at all involved here, that wouldn’t be possible, especially with the heavy presence of oil here.
Some other significant findings in the report:
- Agriculture sector growth fell to an anemic 3.5% last year. That’s problematic. The potential for helping a lot people through agriculture activities here is huge. Yet the barriers listed, such as limited credit availability and irrigation problems are huge. Azerbaijan has no significant domestic source of credit, and has a generally poor infrastructure for getting credit to farmers, anyway.
- The report recommends increasing revenues from taxes. Ha. First, you’d have to get the tax folks to not engage in corruptive practices. Then you’d have to find a way to squeeze more money out of the poor. We know of too many families that barely get by on their one breadwinner’s 200 AZN/Month salary. Good luck
- The only real source of investment here from the government comes from SOFAZ. With those funds being subject to oil prices, this seems like a recipe for disaster when forecasting what kind of public investments can be made from year to year.
I know there’s more here to discuss, but it’s a start. Maybe the ADB is trying to be diplomatic, but it’s a tough report to handle when you’re living in the context of it.