Weekly actual topics in Azerbaijan (June 20-24)

Analysis Materials 29 June 2016 11:29 (UTC +04:00)

WB: Azerbaijan’s state budget rational

There is rationality in Azerbaijan’s state budget, the World Bank Regional Director for South Caucasus Mercy Tembon said in an exclusive interview with Trend.

She was answering a question regarding the necessity to review Azerbaijan’s state budget due to the increase in oil prices.

“Defining the state budget is responsibility of [Azerbaijan’s] ministry of finance,” Tembon said. “And before they prepare it they take into consideration many things: revenue, expenditure, capital expenditures, investment and the current expenditure. Taking all of that in consideration they do prepare the project. I never doubt the judgment of the ministry of finance.”

Samir Sharifov, Azerbaijan's finance minister, told reporters earlier that Azerbaijan does not plan to reconsider the state budget forecasts for 2016.

“Of course, the last year's experience showed that the fluctuations in the currency market, the pressure on the exchange rate, the sharp decline in foreign exchange reserves of the Central Bank of Azerbaijan force the government to collect a large amount of currency,” said the minister.

“Therefore, taking that into account, we must conduct a more frugal budgetary policy," added Sharifov.

In February 2016, Azerbaijani government reconsidered the state budget’s parameters taking into account the oil price of $25 per barrel due to the sharp decline in oil prices in the world markets.

But starting from the second half of April 2016, global oil prices began to rise gradually.

As of June 21, the price of Dated Brent oil, produced in the North Sea, was $48.8 per barrel. The price of Azeri Light crude oil rose to $50.8 per barrel.

According to the adjusted state budget, its revenues are projected at 16.822 billion manats and expenses at 18.495 billion manats.

The state budget deficit is expected to be 1.673 billion manats.

Azerbaijan, WB in positive direction in conducting economic reforms

Azerbaijan and WB are in positive direction in the country’s economic reforms, the World Bank Regional Director for South Caucasus Mercy Tembon said in an exclusive interview with Trend.

Azerbaijan’s Ministry of Finances is working very closely with the Central Bank to address the issues of the financial sector, and the WB team is providing a technical assistance to them, she added.

“Azerbaijan, like all the countries in the South Caucasus region, is going through headwinds,” Tembon said. “And these headwinds are caused by decline in oil prices. There is also slowdown of other economies that are rather big economies like Russia and so on, trade has been affected and impacted by the economic crisis.”

“There has also been, as you know, the devaluation of the manat, which has impacted the economy [of Azerbaijan],” she noted. “The government is working very hard, I must say, to address these issues.”

Trend also interviewed Larisa Leshchenko, head of the WB Baku office, who said the establishment of the Financial Market Supervisory Body, and its decisions will bring positive results to Azerbaijan’s financial sector.

“We had a team here [in Azerbaijan] in January that worked with the government and there are quite a number of reforms, particularly in the banking sector ensuring that there is deposit insurance, that the non-performing loans are being addressed, and also we had the issues relating to liquidity, which are all the things the government has been addressing,” she added. “I think we are in positive direction.”

“If a new financial institution is established with professional staff and the financial institutions and consultants provide significant support, sooner or later this will bring positive results,” she said.

Leshchenko added that at present, any action of the Azerbaijani Central Bank is positive, as those actions contribute to the country’s adaptation to the challenges it is facing.

“There are certain problems and challenges in the financial sector, but we must not forget that many countries have experienced a similar situation,” she said.

“The system is being consolidated, cleaned up. These are normal processes,” Leshchenko said, adding that this is better than doing nothing.

“It is important to understand that any changes are always for the better, because it is important to advance,” she said. “It is possible to make a correct or maybe not so very correct decision, but the success is always achieved when some decisions are made and the process of adaptation to existing conditions is underway.”

Iran may carry up to 3M tons of cargo to Europe through Azerbaijan

Iran may carry up to three million tons of cargo annually to Europe through Azerbaijan, TRACECA international transport cooperation program national secretary on Azerbaijan, expert Akif Mustafayev said.

Commenting on the recent statements of the Iranian side that the cargo going to Europe through Turkey may be redirected through Azerbaijan, Mustafayev said that this is quite realistic.

“Recent developments in Turkey in the area bordering with Iran, the frequent cases of terror threaten transportation of ​​goods on this territory,” said Mustafayev. “The latest, in some way historical agreements between Azerbaijan and Iran, for example, regarding joining of railways of the two countries, framework agreements signed by the heads of states, construction of the railway bridge over the Astarachay river, creation of cargo terminals on both sides of the border, decisions adopted in Azerbaijan regarding handling of cargo from road transport to railway, tax exemption of the carriers - all this creates good conditions for Iranian carriers to send goods to Europe through Azerbaijan and Georgia.”

He added that the relations between Iran and Azerbaijan have recently become more positive and friendly, which creates a good basis for future cooperation.

“One should also consider the fact that Iran is a part of the TRACECA transport corridor, and a meeting with the representatives of the Iranian transport ministry was recently held in Odessa, Ukraine,” the national secretary said. “That is, a basis to use Azerbaijan as a transit country between Iran and Europe is being created. Iran's intentions are very positive and real. Diversification of routes is currently taking place in the world, because no one wants to depend on only one route.”

Speaking about the possible cargo volumes, which will pass through Azerbaijan, Mustafayev said that Iran carried nearly three million tons of cargo per year to Europe through Turkey.

“I believe that Iran will be able to carry the same volume of cargo, may be slightly less through Azerbaijan,” Mustafayev said. “The cargo will pass through Azerbaijan to Georgia, and from there via the Black Sea ports to Europe, and when the Baku-Tbilisi-Kars railway is launched, the cargo will go through Turkey as well.”

“Of course, the route becomes longer for Iran, but it’s necessary to take such steps for the sake of security of the cargo,” he added. “Given the fact that modernization of railways in Azerbaijan and Iran is currently underway, the time loss can be compensated by increasing the speed of trains. The only thing that remains to be done is to start concrete actions on this issue.”