State switches to saving regime

/By AzerNews/

By Nigar Orujova

The government of Azerbaijan is switching to a strict regime of saving in the next 4 years, introducing a number of changes to the budget forecast for 2016.

This move is linked with decreasing oil prices on the world markets and switching to the new exchange rate policy of the national currency, Finance Minister Samir Sharifov said at a Cabinet of Ministers’ meeting on January 10.

“These changes need to pursue such goals as compliance of the income of the consolidated and state budgets to the new conditions, increasing the efficiency of budgetary expenditures, continuing the policy of the compactness of the budget carried out in recent years, keeping the foreign currency reserves, giving the extra incentive to the development of the non-oil sector and entrepreneurship,” said the minister.

He went on to add that measures are expected to neutralize the possible negative effects of increasing prices for essential commodities on vulnerable populations.

“Moreover, given the volume of investments in the country and abroad, there must be addressed issues such as preparation of a balanced income and expenditure budget, which will provide a strict regime of saving in 2016 and the next three years, strengthening of the financial discipline and order for economical use of public resources, prevention of waste and unnecessary costs, as well as improvement of the state management system, implementation of reforms in the management of companies, giving an additional boost to the process of privatization of state property,” Sharifov said.

The minister assured to make every effort to mitigate the negative effects of the global economic challenges on the country’s economy.

Despite the vulnerable global economic situation, non-oil revenues of the state budget of Azerbaijan performed at 103 percent in 2015.

Last year, the state budget revenues from non-oil sector amounted to 6.95 billion manats ($4.4 billion), which by three percent exceeded the forecast figure and is by 9.5 percent more than in the same period in 2014, Sharifov said.

During the reporting period, the total revenue of the state budget is 2.3 billion manats ($1.5 billion) -- or 11.6 percent -- less than the planned volume.

“The main reason for the decrease in revenues is the reduction in volume of transfers of the State Oil Fund due to the sharp decline in oil prices on the world markets. Therefore it was decided to save foreign exchange reserves of the Oil Fund,” the minister explained.

The minister said that in 2015, spending on education amounted to 1.605 billion manats ($1.02 billion), which is 3.3 percent more compared to the previous year. Spending on health care in the reporting year amounted to 708 million manats ($451 million) which record a 6.4 percent growth compared to 2014.

Expenditures on social protection and social security amounted to 1.857 billion manats ($1.2 billion). About 18 percent of budget expenditures or 2.7 percentage points more money than the year before were directed to the increase of the defense capability and security of the country, ensuring the social protection of servicemen in 2015.

About 1.7 billion manats ($1.1 billion) were directed to finance major infrastructure projects through loans raised by the government, and 994 million manats ($634 million) came on this purpose from the State Oil Fund.

The government has already cut budget expenditures for 2016, when adopting the state budget in October 2015.

State budget expenditures, compared to 2015, fell by 22.9 percent, and compared to 2014, they declined by 13.07 percent. Budget indicators were formed taking into account an oil price of $50 per barrel and the national currency rate of 1.05 manat/$1.