The National Bank of Azerbaijan (NBA) has publicized the major reasons for inflation in the country. Elman Rustamov, the Chairman of the Managing Board of the NBA, stated during discussions on Draft 2007 Public Budget in the Parliament that one of the factors is the rise in net income by 23% and public budget expenses by 70%-80%. In this situation the demand prevails in the correlation between demand and supply. At present the rise in the non-oil sector is 7.4%, whereas there has been drop in agriculture. Obviously, a rise in the community income alters the correlation between demand and supply, Rustamov pointed out.
A rise in world market oil prices on one hand leads to the increase of export potential, but on the other hand the currency reserves of the country encourages inflation in the oil-consuming countries.
We will see a considerable rise in prices if we view the import structure. It is an obvious response by oil-consuming countries,' Rustamov said.
Another factor affecting the growth pace of consumer prices is expenditure inflation. The expenses rise even when they seem to be groundless. Over 9 months the wholesale price of industrial goods has risen by 19%, while agriculture products rose by approximately 13%. Our experience confirms that even the rise in cement products, even though it is not included in the calculation of the consumer price index CPI, is enough to have an impact in other consumer markets, he assured.
Since the beginning of the year the growth rate of inflation made up 7.6%, which corresponds to the targets of the NBA and the Government on the maintenance of one-digit inflation. The major task of the Government is to maintain the inflation at a one-digit level by the end of the year. But it cannot be resolved only through monetary factors (45%). The non-monetary factors should also be taken into consideration, Rustamov said.
He also stressed the necessity to resolve institutional issues. It is noted that a permanent ratio of economic development of the government, large oil revenue, is intended to change the rivalry into diversified economy and resolve problems of socio-economic infrastructure. We must carry out well planned social policy and anti-inflation measures. The rise in prices of agricultural products also has an influence on people with a low income, he stated.