* Azeri currency under severe pressure from low oil prices
* Country adopts some controls on forex outflows
(Adds new information on tax breaks, details)
By Nailia Bagirova
BAKU, Jan 19 Azerbaijan imposed some limits on
foreign currency outflows in a package of measures adopted by
parliament on Tuesday to prop up the oil producer's depreciating
Rising prices for imported food have stirred protests rarely
seen in a country where oil money and well-equipped security
forces have long ensured public loyalty to President Ilham
The manat has lost about a third of its value against
the dollar in the past month and the central bank has spent more
than half its foreign currency reserves, which now stand at
about $5 billion, trying to protect it from low oil prices. Oil
and gas account for 75 percent of the state's revenues.
Azerbaijan's 10-year dollar bond, which
matures in 2024, rose 0.45 cents to trade at 90.08 cents as the
government sought to contain the crisis. The bond's yield
premium over safe-haven U.S. Treasuries narrowed 11 basis points
to 582 bps.
Central bank chief Elman Rustamov said the government would
impose limits on foreign currency outflows and introduce a 20
percent tax on currency exports related to direct investment,
the purchase of real estate or securities abroad.
No limits would be imposed on currency exports related to
education, medical treatment or outflows relating to court
decisions, Rustamov told parliament's economic policy committee.
He said between five and seven banks may have to merge.
Other measures would remove the insurance limit on deposits
held in local banks and a 10 percent tax on interest paid on
retail deposits from Feb. 1. Rustamov said the changes would be
introduced for a three-year period.
Deposit insurance currently covers retail deposits of up to
30,000 manats ($18,700) with interest capped at 12 percent
Some tax breaks were also agreed. Entrepreneurs importing
equipment will pay no land, property or value added taxes or
custom duties. Half their income will also be tax exempt for
Those measures are aimed at supporting businesses outside
the oil sector, which will also get loans worth 250 million
manats from the National Entrepreneurship Support Fund.
Rustamov said the central bank was also ready to discuss a
proposal to allow private individuals to repay foreign currency
loans at a rate of 1.05 manats per U.S. dollar. On Tuesday, the
central bank set an exchange rate of 1.6028 manats per U.S.
dollar. The rate was valid until Jan. 21.
The move may apply to loans of up to $5,000 and a total of
250 million manats would be needed to support the proposal, he
The central bank had already received requests to approve
several mergers, he told reporters, saying international
financial institutions had shown some interest in getting
involved. There are 42 lenders with banking licences in
(Writing by Margarita Antidze; Editing by Andrew Osborn and