IMF (International Monetary Fund) has expressed its attitude toward the recent advance in prices on energy carriers and its impact on the inflation growth rates in Azerbaijan.
Trend reports quoting a message being spread by IMF today, that the impact of the recent advance in prices on the costs of other consumer goods is under question.
IMF experts say that it is necessary not to mix the direct influence of the advance in prices from the inflation process.
According to calculations made by IMF experts, the energy carrier prices and public utilities will have a direct effect on the index of consumer prices at a level of 4-5% and be restricted by once-for-all growth.
In a time, the increase in the energy carriers prices may lead to the growth of other consumer prices, however, the calculations show that the influence will be lower than the direct effect.
Such once-for-all combined increase will be linked with the pressure as a result of expanding consumption, therefore, it is necessary not to mix the process from the fixed inflation. The pressure is a result of the lack of correspondence between goods and services supply and the rapidly-increasing demand on them.
The recently-occurred advance in prices on consumer goods at about 10-15% significantly exceeds the level stipulated by the increase in prices on energy carriers. Such an increase in the consumer costs was most likely the result of the Azerbaijan Government carrying out expansionist macroeconomic and income policy in 2006.
According to other calculations made by IMF, the Government summary expenditures in 2006 increased by about 76%, the significant growth of salary in the state-controlled sector and the increase in the minimal wage since January 1, 2007 has led to the total increase in the salary by 33%. The rise in manat money supply in 2006 was at the level of 133%.
All the factors have led to the significant increase in demand in the not so large-scale non-oil sector, that, in its turn, has had effects on the inflation rate. The increase in energy carriers prices and tariffs on public utilities could only speed up and intensify inflation expectations, which have already fortified their position in the light of continuation of expansionist policy, the message says.
At the same time, the regulation of prices on energy carriers will bring more advantages from redistribution of resources from indirect subsidizing of fuel and energy complex to needs of economic development and reduction of poverty. However, it is necessary to take essential auxiliary measures in order to maximally use it:
Azerbaijan should immediately take the inflation under its control through the macroeconomic and income policy to avoid potential threat on the rise in prices and salary spiral. It is necessary to reduce the fiscal expansion rates (rapid increase in budget expenditures) to an acceptable level and strengthening the monetary policy. These measures will become a decisive step in restoring the balance between the goods and services supply and the face consumer capability of the population and enterprises. In addition, it is necessary to take well-coordinated and efficient measures to eliminate the monopolist policy experience. The rise in prices in Azerbaijan will further to it as well.
The Government should ensure taking the following measures simultaneously with the recent advance in prices on energy carriers: to increase the quality of public utilities (to take urgent steps to improve the financial discipline and introduction of corporative management in state-run enterprises, as well as fully compensate the recent rise in the prices not to allow worsening the situation with special indigent groups within the address social allowance programme).