The oil boom, the 2015 oil-price shock, and the manat devaluation

Azerbaijan's growth chart shows an extraordinary boom in the mid-2000s, when real GDP grew by more than 25% a year in 2005-2006 as the Baku-Tbilisi-Ceyhan pipeline came online and oil output surged, before growth settled into a steadier but still oil-driven expansion through the early 2010s. That dependence became a liability when Brent crude prices fell from around 115 dollars a barrel in mid-2014 to under 35 dollars by early 2016: the Central Bank of Azerbaijan first devalued the manat by about 34% on 21 February 2015, resetting the rate to 1.05 manat per dollar, stating in its official announcement that the move was meant to diversify the economy and protect the balance of payments and the country's international standing as reserves drained. When the lower oil price proved persistent, the central bank abandoned the peg entirely on 21 December 2015, letting the manat float; it lost roughly half its remaining value within days, and the shock pushed the heavily dollarized banking sector into crisis, culminating in the 2017 restructuring of about 3.3 billion dollars of debt at the state-controlled International Bank of Azerbaijan, the country's largest lender.