20 Manat (Heydar Aliyev) – Azerbaijan

In 2023, Azerbaijan's currency, the manat (AZN), demonstrated remarkable stability, continuing a trend established after the dual devaluations of 2015 and 2017. This stability was primarily anchored by robust hydrocarbon revenues, driven by elevated global energy prices following the Russia-Ukraine conflict. High oil and gas exports significantly bolstered the country's foreign exchange reserves, which surpassed $66 billion, providing the Central Bank of Azerbaijan (CBA) with substantial firepower to defend the official exchange rate peg, which is closely managed against a US dollar-biased currency basket.

The primary challenge for the CBA throughout the year was managing strong inflationary pressures, which averaged 13.9% in 2022 and remained elevated, though moderating, in 2023. To combat this, the CBA maintained a tight monetary policy, gradually increasing the discount rate to 9% by year's end. This policy aimed to curb domestic demand and reduce dollarization, encouraging the public to hold manat-denominated assets. The stability of the currency, therefore, came with the trade-off of higher borrowing costs within the domestic economy.

Looking forward, the currency situation in 3 highlighted Azerbaijan's ongoing economic transition. While energy revenues guaranteed short-term stability, authorities continued long-term initiatives to diversify the economy away from hydrocarbons and develop the local financial market. The stability of the manat provided a predictable environment for this diversification agenda, but also underscored the economy's continued deep dependence on the energy sector for its macroeconomic and exchange rate equilibrium.