Azerbaijan's central bank has dropped the 4% exchange rate corridor it imposed on commercial banks in order to allow the currency to float freely, the regulator said in an announcement on January 12.

After dispensing with the manat's peg to the dollar in February 2015, the regulator maintained the currency in a controlled flotation regime, and imposed a corridor within which lenders could trade with the manat in order to stave off depreciation. Despite the central bank's best efforts - and the spending of more than 70%, or $11bn, of its gross international assets on propping up the currency - the manat depreciated by over 50% in 2015 and by a further 13% in 2016 against the dollar. This week, it has slowly depreciated by 0.1 to 0.2% per day.

Floating the currency is one of the goals stipulated in the economic recovery roadmap that consultancy McKinsey was commissioned to prepare for the Azerbaijani government. The regulator reportedly held a meeting with the senior executives of the commercial banks in the country on January 9 to brief them on the floating exchange rate.

At a cabinet on January 10, President Ilham Aliyev said that inflation should be contained at under 10% in 2017, down from an estimated 12% at end-2016.