Chapter

AZERBAIJAN

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2004
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(Position as of December 31, 2003)
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 rateThe official exchange rate of the manat is determined as the weighted average of the rates quoted in telephone, auction, customer, and electronic interbank transactions. Most exchange transactions are effected as customer transactions.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketForward transactions are effected through the Baku Interbank Currency Exchange. Currently, these transactions involve only dollars, euros, and Russian rubles.
Arrangements for Payments and Receipts
Prescription of currency requirements
Use of foreign exchange among residentsIn accordance with current legislation, settlements among residents within the country may be effected in foreign currencies only with approval from the Azerbaijan National Bank (ANB).
Payments arrangements
Bilateral payments arrangements
InoperativeAgreements with CIS countries are inoperative.
Clearing agreementsAzerbaijan is a member of the Payment Union of the CIS countries, which is now inoperative.
Barter agreements and open accountsState-owned enterprises and enterprises in which the state has a major share in the authorized capital must register these agreements with the Ministry of Economic Development (MED).
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 MED regulates foreign trade, while the organization and operation of customs are regulated under the Law on the Customs Services.
International security restrictionsNo.
Payments arrearsNo.
Controls on trade in gold (coins and/or bullion)Controls are administered by the Cabinet of Ministers jointly with the ANB.
Controls on external tradeA license from the MED 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. Banks may import and export foreign banknotes only with ANB approval.
On exports
Domestic currencyManat banknotes may be taken out of the country only on the condition that they be returned; the maximum amount that may be exported is manat 50,000.
Foreign currencyResidents and nonresidents may export up to the equivalent of $10,000 and $1,000, respectively, without documentation or up to $50,000 in currency that they previously brought into the country.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyYes.
Held abroadResident enterprises may open and use foreign exchange bank accounts in banks abroad, subject to ANB authorization. Enterprises are obligated 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.
Approval requiredYes.
Accounts in domestic currency held abroadn.r.
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. Prior to opening an account, a nonresident legal entity must provide proof from the Ministry of Justice of its status.
Domestic currency accountsNonresident enterprises may also open and operate accounts in manat and use them for domestic transactions only if they have a local branch or office.
Convertible into foreign currencyNonresidents may acquire foreign currency through authorized banks without restrictions.
Blocked accountsNo.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for imports
Advance payment requirementsImport payments made more than 180 days prior to the delivery of goods require ANB approval. Prepayments by bank transfers for import contracts of goods and services are limited to the equivalent of $25,000. This amount may be exceeded, subject to ANB approval.
Documentation requirements for release of foreign exchange for imports
Letters of creditPrepayments by bank transfers in excess of $25,000 or the equivalent require either an LC or ANB approval.
Import licenses and other nontariff measures
Negative listImports of certain listed goods (such as narcotics, explosives, weapons, and nuclear substances and waste) require special approval.
Import taxes and/or tariffsTariff rates of zero, 0.5%, 3%, 10%, and 15% apply. Some capital and input goods are subject to a 5% tariff. Imports of underinvoiced goods are subject to specific tariffs.
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. Expenses, commissions, and taxes paid abroad relating to economic activities may be deducted from the proceeds prior to their being transferred to a licensed bank.
Financing requirementsYes.
Documentation requirementsAll export operations must be secured by a 100% prepayment, an irrevocable LC, or a bank guarantee.
Letters of creditYes.
GuaranteesYes.
Export licenses
Without quotasExports of scrap metal are prohibited.
Export taxesEffective January 1, 2003, nongovernmental exports of oil and oil products are subject to a tax of 25% of the difference between their c.i.f. price and the price of similar exports by the State Oil Company of Azerbaijan Republic (SOCAR).
Payments for Invisible Transactions and Current Transfers
Controls on these transfersNo.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsProceeds received by residents must be repatriated within six months and transferred to a licensed bank within 10 days of repatriation.
Restrictions on use of fundsNo.
Capital Transactions
Controls on capital transactionsYes.
Controls on capital and money market instruments
On capital market securities
Shares or other securities of a participating nature
Purchase abroad by residentsThe transfer of resources requires ANB approval.
Bonds or other debt securitiesThe regulations governing shares or other securities of a participating nature apply.
On money market instrumentsThe regulations governing shares or other securities of a participating nature apply.
On collective investment securitiesThe regulations governing shares or other securities of a participating nature apply.
Controls on derivatives and other instrumentsThese instruments are not currently available, and legislation concerning derivatives has not been formulated.
Controls on credit operations
Commercial credits
By residents to nonresidentsCredits provided to nonresidents for longer than 180 days and credits to finance projects abroad require ANB approval.
Financial creditsThe regulations governing commercial credits apply.
Controls on direct investment
Outward direct investmentDirect investment abroad requires ANB approval.
Inward direct investmentFor insurance companies, the minimum authorized capital is manat 5 billion and foreign ownership may not exceed 40%.
Controls on liquidation of direct investmentNo.
Controls on real estate transactions
Purchase abroad by residentsThese transactions require ANB approval.
Controls on personal capital transactions
Loans
By residents to nonresidentsLoans to nonresidents with maturities exceeding 180 days require ANB approval.
Gifts, endowments, inheritances, and legacies
By residents to nonresidentsThese transactions are permitted, subject to documentary requirements.
Settlement of debts abroad by immigrantsThese transactions are subject to documentary requirements and must be based on a court ruling.
Transfer of assets
Transfer abroad by emigrantsThese transactions require ANB approval.
Transfer of gambling and prize earningsGambling is prohibited in Azerbaijan.
Provisions specific to commercial banks and other credit institutions
Lending to nonresidents (financial or commercial credits)Credits provided to nonresidents for longer than 180 days and credits to finance projects abroad require ANB approval.
Reserve requirementsThere is a 10% reserve requirement on all deposit accounts, regardless of the currency involved.
Liquid asset requirementsLiquid assets must be equal to at least 30% of current obligations with maturities in the current month, regardless of the currency involved.
Differential treatment of deposit accounts held by nonresidents
Reserve requirementsThere is a 10% reserve requirement on all deposit accounts, regardless of the currency involved.
Liquid asset requirementsLiquid assets must be equal to at least 30% of current obligations with maturities in the current month, regardless of the currency involved.
Investment regulations
Abroad by banksThese transactions are permitted with ANB approval.
Open foreign exchange position limitsThe limit on convertible currencies is 10% for each foreign currency, up to a cumulative limit of 20%.
On resident assets and liabilitiesThe limit on nonconvertible currencies is 7% for each currency, up to a cumulative limit of 15%.
On nonresident assets and liabilitiesYes.
Provisions specific to institutional investorsNo.
Other controls imposed by securities lawsThe domestic circulation of foreign securities is subject to controls and monitoring.
Changes During 2003
Exports and export proceedsJanuary 1. Nongovernmental exports of crude oil and oil products became subject to a tax of 25% of the difference between their c.i.f. price and the official price of SOCAR exports of similar products.

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