Buying foreign currency in Azerbaijan? Explain why you need it

Azerbaijan is tightening the rules for the purchase of American dollars.

Now, to buy more than $500, residents need to explain what they intend to do with them, and from where they got the money to purchase them. The same goes for other currencies. Citizens perceive of this as another attempt to control their every move. Some economists believe that the new law will lead to the emergence of a black market.

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When in early 2020 the oil price began to fall, many in Azerbaijan were afraid of a possible devaluation and began to buy dollars. But the government has so far managed to keep the dollar exchange rate at the same level: $1 costs about 1.7 manat. The panic has since subsided.

Why do you need dollars?

According to the new rules announced by the Central Bank, any purchase of more than $500 will require a form indicating a person’s name, surname, phone number, source of exchanged money and the purpose of the exchange.

Those who exchange more than 20,000 [about $12 thousand] will end up on the radar of the  Financial Monitoring Service, Fed.az writes. In this case, individuals will have to provide additional documents. For example, if a person exchanges money after the sale of a house, individuals will need to show a notarized document attesting to the sale.

 Funds whose origin their owner cannot explain are subject to 14% tax.

Outrage, gloomy forecasts and approval

 Economist Natik Jafarli called the tightening “absurd.” In his opinion, the Central Bank wants to artificially reduce the demand for foreign currency, control its purchase and thus maintain the manat rate.

“These measures will lead to the emergence of a black currency market in the country again.  In addition, difficulties with buying foreign currency means a shortage of imported goods and higher costs,” said Jafarli.

 He also predicts a decline in economic activity and an increase in unemployment. 

Individuals who have already tested the new system share largely unpleasant impressions:

 “I was already twitching when they told me to fill out the form. In my opinion, this is an interference in my privacy. I bought 500 euros. I wrote that I was going to put it on a credit card.  But in fact, I put them in a box in the cupboard, because it’s more convenient for me to save money like that. What do they care? It felt like they were climbing into my pocket. It’s as if they’re peeking into my wallet, digging around in my linens”, Tarana from Baku says.

However, accountant and auditor Arzu Velieva believes that the new rule is not without meaning.

 “This is a usual tax control mechanism to combat money laundering, terrorist financing or simply undeclared income. I understand that for ordinary citizens this procedure is unpleasant, and there is a lot of fuss, but for the state as a whole this is useful. And, whatever one may say, this is the right, civilized way of conducting currency transactions.”