Annual Report on Exchange Arrangements and Exchange Restrictions 2005
Chapter

REPUBLIC OF AZERBAIJAN

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2005
Share
  • ShareShare
Show Summary Details

(Position as of January 31, 2005)

Status Under IMF Articles of Agreement
Article VIIIEffective November 30, 2004, Azerbaijan accepted the obligations of Article VIII, Sections 2, 3, and 4.
Exchange Arrangement
CurrencyThe currency of Azerbaijan is the Azerbaijan manat.
Exchange rate structureUnitary.
Classification
Managed floating with no predetermined 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 arrangementsYes.
Barter agreements and open accountsState-owned enterprises and enterprises in which the state has a major share of 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 the Customs agencies are regulated under the Law on Customs Services.
International security restrictions
In accordance with IMF Executive Board Decision No. 144-(52/51)On October 28, 2004, Azerbaijan notified the IMF that restrictions are imposed on financial transactions and accounts held by individuals or organizations associated with terrorism pursuant to UN Security Council resolutions and to the list of current terrorist organizations maintained by the U.S. Secretary of State.
In accordance with UN sanctionsFinancial transactions are restricted, and accounts are frozen if they involve individuals or organizations associated with terrorism pursuant to UN Security Council resolutions.
Payments arrearsNo.
Controls on trade in gold (coins and/or bullion)Controls are administered jointly by the Cabinet of Ministers and 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 up to the maximum amount of manat 50,000.
Foreign currencyResident and nonresident individuals 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 accounts in banks abroad, subject to ANB authorization. Enterprises must repatriate the foreign exchange held in accounts abroad (except the amount used for import payments).
There is no regulation on the opening and use of foreign exchange accounts in banks abroad by individuals.
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 ADs, and ADs 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 of its status issued by the Ministry of Justice.
Domestic currency accountsNonresident enterprises may open and operate accounts in manat and use them for domestic transactions only if they have a local branch or office.
Convertible into foreign currencyYes.
Blocked accountsNo.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for imports
Advance payment requirementsEffective November 29, 2004, import payments made more than 365 days (previously, 180 days) prior to the delivery of goods or services require ANB approval; if the relevant goods are not imported, works not executed, or services not rendered, or if the prepayment is not returned within this period of time, the AD is required to report the transaction to the ANB and submit relevant documents. Effective August 1, 2004, the $25,000 limit on prepayments by bank transfer for imports of goods and services no longer applies. Previously, this amount could be exceeded but only with ANB approval.
Documentation requirements for release of foreign exchange for importsNo.
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.
Export licenses
Without quotasExports of scrap metal are prohibited.
Export taxesYes.
Payments for Invisible Transactions and Current Transfers
Controls on these transfers
Personal payments
Quantitative limitsThese transactions are permitted, subject to documentary requirements. Effective November 1, 2004, (1) residents and nonresidents are free to transfer abroad for personal reasons up to the equivalent of $500 a day from accounts with ADs upon declaration of purpose; and (2) residents are free to transfer abroad the equivalent of over $500, up to $10,000 annually, from accounts with ADs for the maintenance of close relatives (i.e., parents, spouses, children, siblings, and adopted children) upon presentation of supporting documents.
Indicative limits/bona fide testYes.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsNo.
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 operationsCredits provided by residents to nonresidents, including financing for projects abroad, for longer than 180 days require ANB approval.
Commercial credits
By residents to nonresidentsYes.
Financial credits
By residents to nonresidentsYes.
Controls on direct investment
Outward direct investmentDirect investment abroad requires ANB approval.
Inward direct investmentEffective January 1, 2005, the minimum authorized capital for existing insurance companies is manat 2.5 billion (previously, manat 2 billion) and for newly established insurance companies, the minimum authorized capital is manat 5 billion. Direct foreign ownership may not exceed 49% of capital; indirect ownership limits are not enforced. Effective January 1, 2005, the minimum authorized capital for existing commercial banks is increased to the equivalent of $3.5 million from $2.5 million.
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. Effective November 1, 2004, residents are free to transfer abroad (1) for personal reasons, up to the equivalent of $500 a day from accounts with ADs upon declaration of purpose; and (2) the equivalent of over $500, up to $10,000 annually, from accounts with ADs for the maintenance of close relatives (i.e., parents, spouses, children, siblings, and adopted children) upon presentation of supporting evidence.
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.
Differential treatment of deposit accounts in foreign exchange
Reserve requirementsThere is a 10% reserve requirement on all deposit accounts, regardless of the currency involved, except for deposits with a maturity of over one year. Effective January 1, 2004, a system of reserve averaging for banks on an intraday basis applies.
Reserve 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, except for deposits with a maturity of over one year. Effective January 1, 2004, a system of reserve averaging for banks on an intraday basis applies.
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 an aggregate limit of 20%. The limit on nonconvertible currencies is 7% for each currency, up to an aggregate limit of 15%.
On resident assets and liabilitiesYes.
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 2004
Status under IMF Articles of AgreementNovember 30. Azerbaijan accepted the obligations of Article VIII, Sections 2, 3, and 4 of the IMF’s Articles of Agreement.
Arrangements for payments and receiptsOctober 28. Azerbaijan notified the IMF that restrictions were imposed on financial transactions and accounts held by individuals or organizations associated with terrorism pursuant to UN Security Council resolutions and to the list of terrorist organizations maintained by the U.S. Secretary of State.
Imports and import paymentsAugust 1. The $25,000 limit on prepayments by bank transfer for imports of goods and services was lifted.
November 29. The period for which advance payments for goods and services could be made without ANB approval was increased to 365 days from 180 days.
Payments for invisible transactions and current transfersNovember 1. Residents and nonresidents were permitted to transfer abroad for personal reasons up to the equivalent of $500 a day from accounts with ADs upon declaration of purpose; and residents were permitted to transfer abroad the equivalent of over $500, up to $10,000 annually, from accounts with ADs for the maintenance of close relatives (i.e., parents, spouses, children, siblings, and adopted children) upon presentation of supporting documents.
Capital transactionsJanuary 1. The ANB adopted a system of reserve averaging for banks on an intraday basis.
Changes During 2005
Capital transactionsJanuary 1. The minimum authorized capital requirement for existing insurance companies was raised to manat 2.5 billion from manat 2 billion and for newly established insurance companies, the minimum authorized capital is manat 5 billion.
January 1. The minimum authorized capital requirement for existing commercial banks was increased to the equivalent of $3.5 million from $2.5 million.

    Other Resources Citing This Publication