BAKU, Azerbaijan, Aug. 3
By Eldar Janashvili – Trend:
The Azerbaijani Ministry of Finance has recalculated the budget parameters for the current year based on the forecast of the average annual oil price of $35, Trend reports citing the ministry.
In accordance with the new indicators, following recalculation of the budget parameters based on the forecast of the average annual oil price worth $35 for the current year (the average annual price worth $55 was announced at the beginning of the year), the expected expenditure of the consolidated budget and transfer from the State Oil Fund of Azerbaijan to the state budget must be decreased by about 2.5 billion manat ($1.5 billion) each or by 8.4 percent and 21.7 percent, respectively.
Given the realities of new oil prices and the decrease in oil production, the application of the budget rule when developing the fiscal framework for 2021 and the next three years requires the sharp reduction in budget spending in the medium term, as well as tax revenues through the oil sector.
Nevertheless, the experience gained so far from the economic and financial crises shows that the sharply narrowing fiscal policy which is applied during the economic crisis periods leads to the sharp decline in the economic activity and employment in the country.
Given the above-mentioned aspects, a decrease in the country's macroeconomic indicators, in particular GDP, leads to a deterioration in the foreign exchange balance, a decrease in the previously predicted non-oil revenues in the second half of 2020, and occurrence of the risks of imbalance between the expected revenues and budget expenditure, said the report.