Weekly economic review

Stormy discussions over the 2009 Public budget project took place at the meeting of parliamentary commission. A special attention was paid on the discussion of the average oil prices forecast, which traditionally is fixed in country's financial documents. The culmination was the reduction of oil prices. On 6 November, the WTI prices for the first time from 22 March 2007 dropped to $60/barrel and made up $59.97/barrel on electron auction.

Under the budget for 2009, the oil prices are set at $70 per barrel, which equals the index of 2008. Decline of oil prices on world markets does not cause alarm for Azerbaijan's state budget for 2009. According to Finance Minister Samir Sharifov, the recent achievements in the macroeconomic stability, financial and economic potential and accumulated financial reserves enable the country to protect from the worldwide financial crisis.

So, the State Oil Fund of Azerbaijan (SOFAZ) carries out stabilization functions and makes transferences to the state budget in the national currency, which comprises AZN 4.915bln in 2009. This will enable to reduce a negative effect on the budget through cutting the real oil prices.

According to records of the National Bank of Azerbaijan (NBA) and Finance Ministry, 75% of incomes of the state budget is protected from oil prices fluctuation. "Independently from oil prices the transferences to the state budget from SOFAZ is carried out in national currency after convertation, as oil is sold in USD, which in its turn also enables to save budget revenues," NBA head said.

The rest 25% budget revenues will be affected by the change of oil prices. However, the country's strategic reserves, which is currently excess $28bln, as well as additional reserves in the state budget allows reducing the dependence through manoeuvring and adequate measures on fluctuation of prices on world markets.

The Chairman of the Accounting Chamber of Azerbaijan Heydar Asadov approved that Azerbaijan's state budget- 2009 was protected from fluctuated oil prices. A total of 85-90% of incomes to the budget are fixed and do not depend on oil prices directly. On the other hand, expenditure of the state budget in 2009, perhaps, will be financed to 97-98% from forecasted indexes to save funds.

The decrease in oil prices on world markets leads to cut in prices of construction and other materials. The majority of funds in the state budget for 2009 is directed to investment purposes, and therefore, cut in material prices will lead to decline in prices of investment projects. Taken into account this factor Asadov said that budget forecast risks for 2009 are minimal.

The incomes of the state budget for 2009 will touch AZN12.177bln and expenditure- AZN AZN12.355bln

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