Chapter

AZERBAIJAN

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2000
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Status Under IMF Articles of Agreement
Article XIVYes.
Exchange Arrangement
CurrencyThe currency of Azerbaijan is the Azerbaijan manat.
Exchange rate structureUnitary.
Classification
Managed floating with no preannounced path for the exchange rateUntil July 8, 1999, the external value of the manat was determined on the basis of morning trading sessions. The morning session was limited to Baku Interbank Currency Exchange (BICEX) member banks. The official exchange rate was determined by the Azerbaijan National Bank (ANB) on the basis of BICEX trading. The afternoon trading was operated by the Organized Interbank Foreign Currency Exchange (OICEX), which included all banks with foreign exchange licenses. The OICEX used BICEX facilities for clearing and operated under trading rules and procedures laid out in a collective agreement signed by each participating member. Trading under OICEX was, however, restricted to a band of ±0.5% of the official ANB rate. Trading has also been allowed on the open interbank market, which also included all banks with foreign exchange licenses.



On July 8, 1999, the telephone market, the auction market, and the interbank market were unified and the administrative regulations were lifted. The official rate is now determined based on a weighted average of these markets; the open interbank exchange market has the dominant weight.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketNo.
Arrangements for Payments and Receipts
Prescription of currency requirementsSettlements with the Baltic countries, Russia, and the other countries of the FSU are effected through correspondent accounts of the commercial banks in these countries or through correspondent accounts of the respective central banks.
Payment arrangements
Bilateral payment arrangements
InoperativeYes.
Clearing agreementsAzerbaijan is a member of the Payment Union of the CIS countries, which has become inoperative.
Barter agreements and open accountsYes.
Administration of controlThe ANB regulates foreign exchange transactions, conducts foreign currency operations, and administers official gold and convertible currency reserve holdings. The ANB also has overall responsibility for issuing licenses to deal in foreign exchange and to open foreign exchange accounts abroad; for regulating foreign exchange operations, including implementing and monitoring compliance with the law; and for establishing prudential rules governing foreign exchange operations. The Ministry of Trade regulates foreign trade, while the Customs Service Law regulates the organization and operation of customs.
International security restrictionsNo.
Payment arrearsn.a.
Controls on trade in gold (coins and/or bullion)Controls are administered by the cabinet of ministries jointly with the ANB.
Controls on external tradeA license is required to conduct international trade in gold.
Controls on exports and imports of banknotesThe exportation and importation of foreign banknotes are regulated by the ANB and the customs agencies.
On exports
Domestic currencyNo more than manat 50,000 in banknotes may be taken out of the country, on the condition that they be returned.
Foreign currencyYes.
On imports
Foreign currencyYes.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyNo declaration of the origin of foreign exchange is required for individuals, who may transfer freely foreign exchange held in these accounts to their close relatives up to $10,000 and, upon authorization, larger amounts, or may freely convert it into domestic currency.
Held abroadResident enterprises may open and use foreign exchange bank accounts in banks abroad, subjopect to authorization by the ANB. Enterprises are obliged to repatriate the foreign exchange held in accounts abroad (except the amount used to pay for imports).



There is no regulation for individuals who open and use foreign exchange bank accounts in banks abroad.
Accounts in domestic currency convertible into foreign currencyNatural and juridical persons may purchase foreign exchange through authorized banks and authorized banks may also purchase foreign exchange in these markets on their own account, in accordance with the regulations of the ANB. These regulations do not set any limit.
Nonresident Accounts
Foreign exchange accounts permittedForeign exchange in these accounts may be transferred abroad or sold to the banks for manat. However, prior approval is required.
Domestic currency accountsNonresident enterprises may also open and operate accounts in manat and use them for domestic transactions, in accordance with instructions issued by the ANB.
Convertible into foreign currencyThe same regulations apply as for resident accounts.
Blocked accountsNo.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for imports
Advance payment requirementsAdvance import payments of more than 180 days prior to the delivery of goods are not allowed. Prepayments by bank transfers for import contracts of goods and services are limited to the equivalent of $10,000. Subject to authorization of the ANB, the amount may exceed the indicative limit.
Documentation requirements for release of foreign exchange for imports
Letters of creditPrepayments by bank transfers in excess of $10,000 require either an LC or the authorization of the ANB.
Import licenses and other nontariff measures
Negative listYes.
Import taxes and/or tariffsTariffs are unified at 15% for most goods and for imports from all countries. Capital and input goods are subject to tariff rates of zero or 5%. A customs fee of 0.15% is levied on imports from all sources.
State import monopolyNo.
Exports and Export Proceeds
Repatriation requirementsResidents are required to repatriate all proceeds from exports within 180 days and transfer them to a licensed bank in Azerbaijan within 10 days of receipt, unless specifically exempted by the government. Expenses, commissions, and taxes paid abroad relating to economic activities may be deducted from the proceeds prior to transfer to a licensed bank.
Financing requirementsYes.
Documentation requirements
Letters of creditAll export operations must be secured by a 100% prepayment or an irrevocable LC.
GuaranteesYes.
Export licensesNo.
Export taxesNo.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersResident individuals are allowed to purchase noncash foreign exchange for transfer abroad for paying of bona fide current international transactions.
Trade-related payments
Indicative limits/bona fide testAny amount may be paid without limitation, on the basis of documents confirming that trade-related costs have been actually incurred. General limitations apply to advance payments.
Investment-related payments
Indicative limits/bona fide testYes.
Payments for travel
Indicative limits/bona fide testThe indicative limit is $10,000. This limit may be exceeded on the basis of an expense estimate.
Personal payments
Indicative limits/bona fide testThe limit is $10,000 for payments related to medical costs, studies abroad, and family maintenance and alimony.
Foreign workers’ wages
Prior approvalYes.
Other payments
Indicative limits/bona fide testThe indicative limit for subscriptions and membership fees varies from $1,000 to $5,000 a year.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsProceeds must be repatriated within six months and transferred to a licensed bank within 10 days of receipt.
Restrictions on use of fundsNo.
Capital Transactions
Controls on capital and money market instruments
On capital market securities
Shares or other securities of a participating nature
Purchase locally by nonresidentsThere are no controls, except for banks that sell their shares to nonresidents within the quota specified by the ANB.
Sale or issue locally by nonresidentsThis process is regulated by the government in coordination with the ANB by establishing quotas and trading authorization procedures.
Purchase abroad by residentsThe transfer of funds is permitted with the approval of the ANB.
Sale or issue abroad by residentsRegulated by the laws on joint-stock companies, securities, and stock exchanges, and by inhouse instruction of the ANB. Sale is mainly by prior subscription (an organized market is just emerging).
Bonds or other debt securities
Sale or issue locally by nonresidentsThe same regulations apply as for shares or other securities of a participating nature.
Purchase abroad by residentsThe same regulations apply as for shares or other securities of a participating nature.
Sale or issue abroad by residentsThe same regulations apply as for shares or other securities of a participating nature.
On money market instruments
Purchase abroad by residentsYes.
Sale or issue abroad by residentsYes.
On collective investment securities
Sale or issue locally by nonresidentsYes.
Purchase abroad by residentsYes.
Sale or issue abroad by residentsYes.
Controls on derivatives and other instrumentsThese instruments are currently not available, and the legislation concerning derivatives has not been formulated.
Controls on credit operations
Commercial credits
By residents to nonresidentsSubject to authorization by the ANB.
Financial credits
By residents to nonresidentsYes.
Controls on direct investment
Outward direct investmentDirect investment abroad requires ANB authorization.
Inward direct investmentProfits may be reinvested in local currency held in Azerbaijan or converted into foreign currency and transferred without controls. Foreign investors are granted certain privileges: enterprises or joint ventures with foreign equity capital ownership of more than 30% are entitled to a two-year holiday on profit taxes, imports and exports of goods and services may be undertaken without licenses, and exporters of manufactured goods are allowed to retain 100% of their foreign exchange earnings.
Controls on liquidation of direct investmentNo.
Controls on real estate transactionsNo.
Controls on personal capital movements
Loans
By residents to nonresidentsYes.
Gifts, endowments, inheritances, and legacies
By residents to nonresidentsThese transactions are permitted, but a court ruling is required.
Settlement of debts abroad by immigrantsSubject to presentation of satisfactory documents and based on a court ruling.
Transfer of assets
Transfer abroad by emigrantsSubject to authorization by the ANB.
Transfer of gambling and prize earningsYes.
Provisions specific to commercial banks and other credit institutions
Borrowing abroadYes.
Maintenance of accounts abroadYes.
Lending to nonresidents (financial or commercial credits)Subject to authorization by the ANB.
Lending locally in foreign exchangeYes.
Purchase of locally issued securities denominated in foreign exchangeYes.
Differential treatment of deposit accounts in foreign exchangeYes.
Reserve requirementsThere is a 10% reserve requirement on deposit accounts.
Liquid asset requirementsLiquid assets must be equal to at least 30% of total liabilities.
Credit controlsThese controls are in the form of different classifications and provisions.
Differential treatment of deposit accounts held by nonresidents
Reserve requirementsThese controls are in the form of different classifications and provisions.
Liquid asset requirementsThese controls are in the form of different classifications and provisions.
Credit controlsThese controls are in the form of different classifications and provisions.
Investment regulationsThe Law on Banks and Banking grants the ANB the right to set quotas for participation in banks’ equity capital by foreign investors. This same law establishes regulations governing the investment of funds in shares of other banks, nonbank enterprises, institutions, and organizations.
In banks by nonresidentsSubject to authorization by the ANB.
Open foreign exchange position limits
On resident assets and liabilitiesYes.
On nonresident assets and liabilitiesYes.
Provisions specific to institutional investors
Limits (max.) on securities issued by nonresidents and on portfolio invested abroadThe regulations and procedures governing participation by nonresidents in the securities market are determined in accordance with the Azerbaijan Republic Law on Securities and by the Committee on Securities under the president of Azerbaijan.
Limits (max.) on portfolio invested abroadn.r.
Other controls imposed by securities lawsIn accordance with the Azerbaijan Republic Law on Securities, the circulation of securities of foreign issuers in Azerbaijan is regulated by the Committee on Securities. Securities of issuers registered in Azerbaijan may be placed outside Azerbaijan with the authorization of that same body.
Changes During 1999
Exchange arrangementJuly 8. The three foreign exchange markets were unified and the official exchange rate is now determined on the basis of the weighted average of these markets.

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