By AZE.US
Keeping large amounts of cash at home carries two major risks: the money earns no interest and gradually loses purchasing power because of inflation.
Azerbaijani lawyer and financial expert Akram Hasanov said the Central Bank expects inflation to reach approximately 6% in 2026, while local banks currently offer annual interest rates of about 10% to 12% on deposits denominated in manats.
Interest rates on foreign-currency deposits are considerably lower.
“In formal terms, keeping money in a bank appears more profitable than holding cash at home,” Hasanov said.
“Money kept at home generates no income. A bank deposit, meanwhile, may offer a return above the inflation rate, allowing not only nominal but also real income to increase.”
However, Hasanov noted that Azerbaijan’s official inflation figures are frequently criticized because they are calculated using price changes across several hundred goods and services.
An individual consumer does not purchase all the items included in that basket. Prices for food and essential services used daily may rise more rapidly, meaning a household’s “personal inflation” can be significantly higher than the official average.
Even if actual inflation affecting consumers reaches 8% to 10%, returns on some manat deposits remain close to or above that level. Depositing the money could therefore at least partially offset the loss of purchasing power.
Cash stored at home also carries the risk of theft. When choosing a bank, savers should consider its reliability, deposit insurance coverage, interest rates and conditions for early withdrawal.
Hasanov acknowledged that many Azerbaijanis have little opportunity to build savings because their monthly income is used almost entirely to cover everyday household expenses.
“If a person has savings and the interest rate offered by a bank exceeds inflation, placing that money in a deposit may be more advantageous than keeping it as cash at home,” he concluded.
AZE.US