BAKU, Azerbaijan, July 18. Azerbaijan has come a long way in achieving improvement in its financial situation, Trend reports.
Thanks to a variety of factors, including strengthening discipline in the financial sector, implementing tax and customs reforms, and promoting transparency, the country has been able to significantly improve its financial stability and efficiency.
Successful management of the state budget and exceeding expected collections allowed Azerbaijan to revise its budgetary performance, thus providing new opportunities to address the country's priorities.
Speaking at a meeting dedicated to the socio-economic results of the first half of this year, President of the Republic of Azerbaijan Ilham Aliyev noted the improvement in the country's financial situation.
"This has happened for a number of reasons. First of all, the strengthening of discipline in the financial sector, the continued reforms of tax and customs bodies, and transparency—all these factors have allowed us the opportunity to review the budget in the middle of the year and conduct reconciliation. This is very gratifying because the collected funds have significantly exceeded the forecast. Our state budget this year has already reached a record level—it has risen to the level of more than 33 billion dollars. However, the acquisition of additional revenues in the first half of the year allowed us the opportunity to make additions to the budget to address urgent issues, and we did that. Today, our budget is in excess of 36 billion dollars. Of course, this has also enabled us to implement the main investment projects facing the country. First of all, I want to say again that we should give further impetus to extensive construction work in the liberated lands and increase our military power," the head of state said.
Commenting on the issue, Azerbaijani economic expert Ilgar Valizade noted that the processes that are observed in the financial sector of Azerbaijan, in particular increased transparency in financial reporting, tax optimization, as well as the activities of customs and tax services, all together lead to an increase in the efficiency of budget implementation.
Here, it's worth paying attention to the fact that this is also facilitated by a fairly effective monetary policy pursued by the Central Bank of Azerbaijan. It also allows the exchange rate to remain stable for a long time, despite the volatility of the exchange rate in neighboring countries. This is not observed in Azerbaijan, which contributes to maintaining the stability of the financial system," he stressed.
Valizade noted that these processes are taking place in parallel with the intensification of Azerbaijan's participation in regional and international economic processes, in particular, through the implementation of large transport and transit projects.
"Here, the increase in the efficiency of tax and customs services, the digitalization of reporting, and the centralization of the activities of services make it possible to ensure the effectiveness of the apparatus associated with ensuring financial and economic stability. This increases the efficiency of such services as the tax service and bodies that keep records and control economic activity," the expert said.
According to him, the process of continuous improvement of tax legislation has also been going on recently, which plays an important role in improving the efficiency of document flow and reporting, which, in turn, contributes to the removal of certain assets from the shadow.
"Thus, our budget is becoming more and more perfect in terms of execution," he added.
According to another economic expert, Faraj Akhundov, despite the fact that the current tax system in Azerbaijan has much more favorable conditions, a simplified procedure, the amount of tax revenues to the budget is growing.
"That is, entrepreneurs understand that at the moment, in order to successfully obtain loans, demonstrate the good performance of one's company, and enter the international market, it's necessary to pay taxes, have proper accounting and financial management experience in accordance with international standards," he explained. "There is a tendency for many companies to switch to this working scheme, which in turn leads to an increase in budget revenues."
Akhundov also noted that, in parallel with the increase in the budget, spending on the social sphere is increasing.
"Accordingly, pensions and salaries in budgetary structures are increasing, and part of these funds is directed to improving social life in the country. An increase in the budget from $33 billion to $36 billion shows a stable growth of the Azerbaijani economy, which makes the country attractive for foreign investors who see predictability and predictability of the Azerbaijani economy, as well as financial stability and benefits," he said.
"Thus, we can conclude that the Azerbaijani economy is now at a stage of growth, despite the pandemic and crisis. Taking into account world trends, external inflation, and the geopolitical situation, the financial condition of Azerbaijan is improving. Economic growth and dynamics are on an upward trajectory, which will lead to an even greater improvement in the country's financial condition," the expert pointed out.
In the first half of this year, the country's economy continued to develop steadily, and the growing geopolitical and geo-economic importance of our state in the region and the world opened up additional opportunities for faster and more sustainable socio-economic development.
According to Deputy Director of the Department of Macroeconomic Forecasting and Analysis of the Ministry of Economy of Azerbaijan, Vugar Abdullayev, there are a number of reasons for improving the country's financial situation.
"One of the reasons can be called the growth of tax revenues. So, from January through June 2023, tax revenues amounted to 2.7 billion manat ($1.59 billion), which means an increase of 42 percent compared to the corresponding period last year. Revenues in the non-oil and gas sector also increased," he said. "Funds, proceeds from privatization, and the state budget also increased compared to the same period last year. At the same time, as a result of anti-inflationary measures, implemented against the backdrop of global inflation and the action plan approved by the government, inflationary processes in the country are slowing down."
Due to the realization of the opportunities created by the current economic conditions, including the transit potential, the volume of exports increased, and the country's foreign trade balance continued to have a large surplus, the official noted.
Abdullayev further noted that, in addition to the above, the implementation of flexible measures that positively contribute to the creation of a favorable business environment in the country, as well as an increase in the scale of restoration and construction work in the liberated territories, the expansion of the activities of enterprises registered in industrial zones, the continuation of measures in the field of privatization of state property, and other such measures, created conditions for expanding the financial capabilities of the country.
"Besides, effective management of the country's energy resources and high oil and gas prices on the world market have created additional opportunities for the financial and economic system," he said.
Efficient public debt management is becoming one of the key challenges for many countries. In an effort to ensure sustainable development and economic stability, governments are actively working to reduce the amount of external public debt. In this context, Azerbaijan demonstrates impressive achievements in the field of external public debt management, based on the implementation of the strategic objectives set several years ago.
Speaking at a meeting on the socio-economic results of the first half of this year, President Ilham Aliyev noted that the goal of reducing the volume of external public debt to less than 10 percent of gross domestic product was achieved.
"We are also working in the direction of foreign state debt management on the basis of the assignments I gave a few years ago. I said a few years ago that we should set a goal, and we did, that our foreign public debt should be below 10 percent of our gross domestic product. It should be at that level. We have already reached this point. We have reached this goal. In absolute terms, our debt totals 6.7 billion dollars, which accounts for about 10 percent of our gross domestic product. Of course, the final figures for our gross domestic product will be calculated at the end of the year. But it is possible to make a prediction even now. In the first six months, gross domestic product amounted to more than 60 billion manats," the head of state noted.
The Fitch Ratings international agency predicts that Azerbaijan will reduce its debt by more than three percent of GDP by 2025.
Azerbaijan's achievement of the goal of reducing external public debt to below 10 percent of gross domestic product is a significant success for the country. This indicates a careful and efficient management of financial resources and a responsible approach to fiscal policy.
Such achievements allow Azerbaijan to ensure the stability of its economy and create favorable conditions for growth and development. The steady decline in external public debt demonstrates Azerbaijan's financial independence and confidence in the international arena. The continuation of such positive trends will further strengthen the economy and improve the well-being of citizens.
In general, the growth of Azerbaijan's financial indicators is an important indicator of its economic development and sustainability. The refinement of the state budget and the increase in its volume, including additional revenues in the first half of the year, created a favorable situation for the implementation of large-scale investment projects in the country, especially in the reconstruction of Karabakh and Eastern Zangazur, as well as strengthening military power.
Azerbaijan continues to focus its efforts on achieving these priorities, which reflects its desire for stability, development, and well-being for its citizens. The results achieved in the field of finance provide Azerbaijan with the opportunity to reliably and confidently move forward on the path to prosperity and success.