The Manat Is Strengthening: What Does It Mean for the Economy?

In recent months, the Azerbaijani manat has strengthened its position against foreign currencies. This trend has both positive and negative consequences. Economists analyze the situation from various perspectives and put forward different scenarios for the future. Here is a detailed analysis of the main reasons behind the manat's strengthening, its outcomes, and its impact on different sectors of the economy.

Key reasons for the strengthening

Several fundamental factors underpin the manat's stronger position:

• Rising oil prices — the stabilization of global oil prices between 85 and 90 dollars per barrel has bolstered Azerbaijan's foreign currency reserves. Revenue flowing into the State Oil Fund has increased by 15 percent compared to 2025.
• Growing non-oil exports — foreign currency earnings from agriculture, tourism, and the IT sector have risen significantly over the past two years. Agricultural exports alone recorded a 22 percent increase.
• Foreign direct investment — the volume of foreign investment entering the country has grown. Major projects in green energy, technology parks, and logistics infrastructure are underway.
• Central Bank policy — the Central Bank has skillfully managed interest rates and currency interventions, maintaining the manat's stability.

Positive effects

• Cheaper imports — the cost of goods brought from abroad is falling
• Lower inflation — food prices are stabilizing
• Higher consumer confidence — citizens are spending more
• Reduced foreign debt burden — dollar-denominated obligations are shrinking in manat terms
• Greater purchasing power — the real income of citizens is rising

The reduction in import costs has a particularly significant impact on consumers. Declines have been observed in the prices of electronics, automobiles, medical equipment, and food products. According to the State Statistics Committee, the consumer price index in January-February 2026 fell by 2.3 percent compared to the same period in 2025.

Negative effects

• Exports become harder — domestic products grow more expensive on foreign markets
• Tourism revenue may decline — the country becomes relatively more expensive for tourists
• Local producers face pressure — competition from imported goods intensifies
• Remittances decrease — the manat value of money sent from the diaspora drops

The situation is especially difficult for exporters. The competitiveness of Azerbaijani tomatoes, hazelnuts, and other agricultural products on Russian and European markets has declined. The Exporters' Union has issued a statement urging the government to take additional measures to stimulate exports.

Impact by sector

**Agriculture:** The cheaper cost of imported fertilizer and machinery has lowered production costs, but exporting finished products has become harder. Farmers face a mixed situation — expenses are down, but revenue may fall as well.

**Construction:** The drop in the price of imported building materials — cement, steel, glass — has reduced the cost of construction projects. This is helping to stabilize real estate prices.

**Tourism:** A strong manat makes the country relatively expensive for foreign tourists. On the other hand, travel abroad has become cheaper for Azerbaijani citizens. The Tourism Bureau is planning additional marketing campaigns to attract foreign visitors.

**Technology sector:** For IT companies, the strong manat is largely positive. Acquiring foreign technology and licenses has become cheaper, though the competitiveness of services offered to foreign clients has decreased.

The Central Bank's position

In its statement, the Central Bank noted that monetary policy is ready for adjustments and that market stability remains the priority. Bank leadership emphasized the following points at a recent press conference:

• Foreign currency reserves are strong enough to respond to any market shifts
• Interest rate policy will be adjusted in line with economic indicators
• The inflation target is maintained at 4 percent
• Macroprudential measures for financial stability will continue

Expert forecasts

Economists hold differing views on the manat's short- and medium-term outlook. Some experts believe that if oil prices remain high, the manat will maintain its strong position through the end of 2026. Others think that global economic uncertainties could limit the manat's appreciation.

The International Monetary Fund's latest report projects that Azerbaijan's economy will grow by 3.5 percent in 2026. This forecast is 0.3 percentage points higher than the previous estimate, signaling growing confidence in the economy.

Practical advice for citizens

The manat's strengthening also affects citizens' financial decisions. Financial advisors recommend the following:

• Diversify your savings — do not put all your eggs in one basket
• Major imported purchases (electronics, cars) may be more cost-effective now
• This is a favorable time for those considering foreign-currency loans
• Review long-term investment plans

Comparison with neighboring countries

To evaluate the manat's strengthening in a regional context, it helps to compare it with the currencies of neighboring countries. Georgia's lari and Turkey's lira have both lost value against foreign currencies during the same period. This suggests that Azerbaijan's oil-revenue-backed economic model is more resilient than those of its regional competitors.

However, this comparison does not tell the full story. Since Turkey and Georgia have export-oriented economies, a weak currency provides certain advantages for their exporters. Azerbaijan, with a strong manat, is compelled to boost product quality and added value to maintain export competitiveness.

Digital manat prospects

Against the backdrop of the manat's strengthening, the Central Bank's digital manat project is also drawing attention. The digital manat, whose pilot phase is expected to begin in 2026, will make payment systems faster and cheaper. This will be especially beneficial for international payments and small business transactions. Full implementation of the digital manat will fundamentally modernize the country's financial infrastructure.

Conclusion

Overall, the manat's strengthening is a positive signal for Azerbaijan's economy, but sustaining this trend requires continued economic diversification and structural reforms. The main challenge facing the government is to maximize the benefits of a strong manat while minimizing its negative effects. Stimulating exports, supporting local production, and accelerating economic diversification must remain top priorities.