External debt not burden for Azerbaijan
Baku, Azerbaijan, Oct. 28 /Trend/
Ellada Khankishiyeva, Head of Trend's analytical center
The presence of some external debts of each country is a very ordinary case of modern economic life, since the active participation of governments in the production and distribution requires attracting borrowed funds to finance its expenditures. Azerbaijan has begun to attract foreign loans since 1993, when experienced shortage of funds. Since then, the amount of external debts has increased by 76 times.
As of July 1, 2011, Azerbaijan's foreign debt reached $4.512.6 billion, making up 8.1 percent of GDP. As of Sept. 1, it had fallen to seven percent.
The International Monetary Fund (IMF) forecasts the reduction of Azerbaijan's external debt to 7.4 percent of GDP in 2012, according to the IMF Middle East and Central Asia Regional Economic Outlook, published on its website. The Fund projects that in 2011 this figure will be 7.8 percent of GDP.
Such an indicator of Azerbaijan's external debt shows that the level of its onerousness in the state budget and foreign exchange resources are within the limits defined by international standards (40-60 percent) as applicable. The higher the figure, the greater share of revenues from the sale of production GDP must be directed not for the purposes of internal development, but for fulfilling the debt obligations to external creditors.
Problems with external debt also arise when the annual amount of repayments on the external debt are greater than the amount of accumulated foreign exchange reserves. The critical value is the ratio of these indices at 100 percent, reflecting the equality of official reserves and the amount of urgent repayments on the foreign debt during the year. Smaller values of the index indicate the probability that the government and residents of the country will cease to repay the urgent duty because of the lack of available foreign exchange.
Azerbaijan is not threatened by such a situation of external debt. According to the Central Bank of Azerbaijan, the strategic foreign exchange reserves of Azerbaijan for the first nine months of 2011 amounted to $6.943.3 billion, which is 1.5 times more than the gross external debt of the country and indicates the absence of problems with solvency.
Maximum annual debt plank is laid in the budget package and is formed only from loans received under state guarantee. The limit on external borrowing in Azerbaijan's 2012 state budget was set at 2 billion manat.
Repayments on public external debt are projected for 2012 at $235.95 million manat, which is 9.7 million manat or 4.3 percent higher than 2011. At the same time, payments on interest rates will amount to 121.11 million manat, on basic debt - 114.84 million manat.
The problem of repayment on external debt is important both in terms of the prospects for achieving national economic growth and maintaining country's position in the world economic system. Failure to perform even part of its obligations to pay off external debt threatens the loss of sovereign credit ratings.
As known from the world economic practice and theory, the effects of a high level of external debt are more difficult for the country than internal debt. Under a high external debt, the nation has to give other countries valuable goods and services to pay off interest and repay the debt, which reduces the standard of living. Large external debt also reduces the country's international position and could complicate attracting new foreign loans.
Even in the most difficult years, when there was an urgent need for foreign funding, Azerbaijan pursued a cautious policy in the issue of external debt, created a system of effective management of public debst. In particular, there were no delays in paying off external debts and a fund was created to provide external borrowings attracted under state guarantee.
Official rate on Oct. 28 is 0.7869 AZN/USD.