5 Manat (Victory in Nagorno-Karabakh War) – Azerbaijan

In 2021, Azerbaijan's currency, the manat (AZN), experienced a year of relative stability and modest appreciation, marking a significant recovery from the dual shocks of the 2015 oil price collapse and the COVID-19 pandemic in 2020. The currency was effectively managed under a managed float regime, with the Central Bank of Azerbaijan (CBA) intervening to smooth volatility. A key factor was the recovery in global oil and natural gas prices, which bolstered the country's primary export revenues and strengthened its foreign exchange reserves. This hydrocarbon-driven stability was further supported by a cautious monetary policy and the continued accumulation of assets in the sovereign oil fund, SOFAZ.

The year also saw strategic policy shifts aimed at reducing dollarization and deepening the domestic financial market. The CBA continued its efforts to promote the use of the manat in local transactions and savings, a process that had been ongoing for several years. Furthermore, 2021 witnessed the successful issuance of manat-denominated sovereign bonds, which helped develop the local capital market and provided an alternative to foreign-currency borrowing for the government. This contributed to reduced exchange rate risk and supported confidence in the national currency.

However, underlying vulnerabilities persisted. The economy remained heavily dependent on hydrocarbon exports, making the manat sensitive to external energy market fluctuations. While inflation was a concern globally, in Azerbaijan it was partly driven by manat depreciation in previous years and rising food prices, prompting the CBA to maintain a tight monetary stance. Overall, 2021 was characterized by a consolidation of stability, with the manat ending the year stronger against the US dollar compared to its 2020 average, providing a foundation for economic recovery while highlighting the ongoing challenge of diversifying the economy away from oil and gas dependence.