The Central Bank of Azerbaijan (CBA) has reported that its currency reserves dropped by $209.6mn to $6.8bn in October.

In February, the regulator resorted to scrapping a four-year peg to the dollar in order to salvage its declining reserves, as maintaining the Azerbaijani currency, the manat, at its previous levels was unsustainable. This resulted in a steep depreciation of 25% on February 21, and an overall depreciation of 33% between February and November.

Since February, the manat has been relatively stable and maintained its value against an undisclosed basket of currencies that, experts estimate, include the dollar (78%), the euro (20%) and other currencies (2%). 

Meanwhile, the CBA's reserves continued to drop, from a high of $15.2bn in August 2014 to $6.8bn in November. Since January, the regulator has lost more than half of its reserves, or $6.9bn.

The CBA's quickly declining reserves point to the fact that sustaining the manat at its current exchange rate is costing Azerbaijan large amounts of foreign reserves. Officials like CBA Governor Elman Rustamov and Finance Minister Samir Sharifov have said that the CBA is mulling letting the currency float freely, which will most likely lead to another sharp devaluation of the national currency. 

Such statements are contributing to the declining trust in the manat, an increase in demand for dollars and a drop in lending activity.