Inglab Ahmedov: Azerbaijan may end up in the budget trap'

Inglab Ahmedov: Azerbaijan may end up in the budget trap'

The round table discussion of the influence of the oil and gas revenue on economy, organized by the Public Finances Monitoring Center (PFMC) with the support of the assistance fund of the Open Society Institute at the International press-center on March 31. Head of the center, Doctor of economics, Inglab Ahmedov emphasized such problems as unreal growth of the manat course, weak competition in the oil sector and deficit of the non-oil budget, Trend reports.

According to him, manat strengthening is one of the Dutch syndrome symptoms. The given process has started in the second quarter of 2005 and by the results of the last year it made up 6,4%, which can seriously affect the economy. One of the reasons is reduction of the dollar course. He also cited the rapid growth of the cash mass starting from the middle of 2002 and by 2005 it has reached 15, 8%

Weak competitiveness of the oil sector is connected to the development of such areas as construction, hotel business etc. which is a natural process for oil rich countries.

The rapid growth of transfers to budget which is designed to cover the oil deficit may lead Azerbaijan into the budget trap i.e. increase of transfers instead of increasing the oil sector competitiveness will in practice lead to its decrease as the inflation growth of budget expenditures is mainly relieved on behalf of manat strengthening, which influences the oil sector development negatively.

Many different models were showed at the seminar- Golden egg and Chicken concept, version of the constant incomes, Norwegian mechanism, Kazakh models of the base payers, stable expenditures and balanced budget. The major task is to choose the optimal model, which is the most difficult task requiring the constant exchange of opinions. A positive tactic has to be applied in the country, like the one used in Alaska and Norway, MP, Ali Masimov said.

Kazakh model of the balanced budget could have been positive for Azerbaijan, it will be used in 2007, Ahmedov stated. It intends concentration of the non-oil incomes for financing of the current programs, and oil incomes- for aimed budget expenditures (investment projects financing). The total weight of the oil incomes to the state budget in Azerbaijan made up 51, 4%, and 48 , 6% in the non-oil sector, it is expected to grow to 58 ,4% and 41, 6% respectively in 2006. The growth is connected first of all with the start of AMOK payments of income taxes and increase of the State oil fund allocations to the budget.

Ahmedov deems this growth as inapproapriate, considering that its 6% in Azerbaijan, whereas in Norway it is -4%, Kazakhstan -4-5%. Despite, the government predicts reduction of the growth it remains the same at the present moment.

Ministry of Finances representatives, present at the meeting did not fully agree with oil sector share growth figures. They consider it as false to include transport, communicational services in the oil sector, as they belong to the service sector.

In this regard growth of the non-oil sector GDP on 10% is considered to be positive. To calculate the non-oil revenues more precisely it is necessary to count the whole income rates volume

A proposal was made at the meeting to create the constant non-governmental body club Azerbaijan 2025, seminar or round table , where the experts could exchange opinions. There are seminars of this kind acting in Turkey, Russia.

Representatives of the scientific organizations, governmental and NGO structures participated at the meeting.

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