Azerbaijan advised to stop relying on oil price in state budget

Baku, Azerbaijan, Aug. 26

By Anvar Mammadov - Trend:

Azerbaijan should pass from the oil export promotion to stimulation of oil refining and export of oil products to reduce the dependence on main export commodity prices, expert economist Farhad Amirbayov said.

"This will reduce the risk of devaluation or revaluation of the manat," he told Trend Aug. 26. "I would like Azerbaijan to step away from such a macroeconomic index as oil price, laid in the state budget. The oil price is not set by us, we can not affect it. Accordingly, the entire economic policy is based on a single index, which we can not affect. It is necessary to get away from this as soon as possible."

Moreover, even if oil prices stabilize, the oil-producing countries will fail to get the same revenue from its sale.

"Even if oil prices stabilize, there is one important thing," said the expert. "The prices can stabilize, they can even go up, but the real purchasing power of proceeds, earned by oil-producing countries, gets reduced from year to year."

"Therefore, the incomes from the sale of crude oil won't be same as before," he added.

One of the main causes leading to the decline in oil prices, as Amirbeyov said, is the reduction in energy resources demand, which in turn is due to a drop in the pace of the world economy's growth.

"It is worth noting that the global economic crisis, which began in 2008, has not yet ended. It is developing and it is not possible to stop the crisis phenomena on a global scale, and this is reflected on national economies," the expert added.

Amirbayov said it is not only the prices of energy resources that are falling, but the prices for transportation of standard containers have also declined.

Amirbayov noted that despite $800-$1000 per container being a profitable level for transport companies, transportations are currently carried out at $500 per standard container.

"Thus, companies have begun to operate at a loss," he added.

The expert also touched upon the issue of the rise of the euro observed against the background of the decline in oil prices, which, in his opinion, is not associated with the strengthening of the European economy.

"The euro strengthens primarily against the dollar, which in turn leads to the accelerated growth of the euro against the national currencies," said the expert. "The matter is not that the power of the euro or the euro economy increases, but that estimates and quotes on many global financial and commodity markets are conducted in dollars."

"This implies that the growth rate of the euro is a compensation for the decrease of the dollar coverage of financial and commodity assets," according to the expert. "As a result, inflationary pressure appears in the dollar zone, possibility of increasing interest rates by the US Federal Reserve System in order to reduce this pressure grows."