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Azerbaijan's government budget deficit to narrow in 2021-2022 - Fitch Ratings

Finance Materials 15 May 2021 16:45 (UTC +04:00)
Azerbaijan's government budget deficit to narrow in 2021-2022 - Fitch Ratings

BAKU, Azerbaijan, May 15

By Fidan Babayeva – Trend:

Azerbaijan’s government budget deficit will narrow from 6.5 percent of GDP in 2020 to 0.2 percent in 2021, Trend reports on May 15 referring to Fitch international rating agency's forecasts.

According to the agency, the budget’s deficit will make up 0.7 percent of GDP in 2022.

"This is driven by strong revenue growth due to the higher oil price and to a lesser extent, a gradual rise in OPEC plus production quotas and the recovery in non-oil GDP (with budgeted SOFAZ transfers unchanged on 2020)," the agency said.

Besides, the agency noted that the level of government on-lending and guarantees was broadly unchanged over the last year, at 31.5 percent of GDP at end-1Q2021, close to three-quarters of which accounted for gas investment projects and the 2017 restructuring of International Bank of Azerbaijan.

"The government has taken a first step towards improving corporate governance in state-owned enterprises through consolidation of reporting and monitoring in the newly-established Azerbaijan Investment Holding," the agency further said.

Contingent liability risk from the state oil company SOCAR, according to Fitch, is mitigated by a low oil production break-even price averaging around $15/b, but its large Foreign Exchange mismatch is a source of vulnerability.

"High banking sector dollarisation and dependence on the hydrocarbon sector (accounting for near 40 percent of GDP, 86 percent of exports, and two-thirds of fiscal revenues) also weigh on the rating," added the agency.

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