AZERBAIJAN IN RATINGS
Along with the economic development and absence of problems with repayment of debts Azerbaijan made a step towards the commercial credits of the international financial institutes. Moreover, the countrys strategy on foreign debts has changed, as today it is taken only for strategically important projects. Upon obtaining considerable funds from the sale of oil Azerbaijan sets up policy on private financing in its territory. The Azerbaijani Finance Minister, Avez Alekperov stated that the public share in the financing of subsequent projects will be increased by 50%.
As to the International Monetary Fund, according to repeated statements by the government it is eager to continue the cooperation with this organization on the consultative base. Refusing from next credit the Azerbaijani government more probably pursued two goals: to reduce the necessity for these funds and to get rid of persistent recommendations.
So, socio-economic growth enabled Azerbaijan to obtain a relative freedom. But could they succeed to achieve equal-right relations with the international financial institutes? In the world economy most depends on how they estimate us and what place Azerbaijan occupied in the ratings. In this case the decisive part is taken by the exact and literate steps by the government in defense of the statehood.
The point is that the self-estimation frequently does not correspond to estimation by foreign organizations. It seriously damages the countrys image.
The first months of 2006 revealed many shortages and disagreement by the government on the estimation of socio-economic state in the country, as well as forecasts for 2006, by the some international institutes.
The Ministry of Finances does not agree with the estimation of the European Bank for Reconstruction and Development (EBRD) on rise in growth pace of inflation to 13% in 2006.
The statement on the estimation was made this week by Anita Tachi, an EBRD expert on Azerbaijan. She said that last year Azerbaijan succeeded to retain inflation in a digit-figure at the expense of the consolidation of manat by the National Bank of Azerbaijan (NBA), as well as retaining the public budget expenses.
The EBRD, WB and IMF cannot say exactly the expected inflation ration in Azerbaijan and the statements by the EBRD are absurd, said the Finance Minister not concealing his annoyance. in 2005 the international financial institutes forecasted the inflation at 15%, while the government succeeded to maintain it at a digit-figure (9.6%).
Owing to expected currency revenues the government intends to take measures in the direction of implementation of the investment policy, execution of budget expenses, development of the state securities market. Only over 2 years the securities market grew 2.7 times. The NBA and the Finance Ministry are considering the capacities for expansion of the market in 2006.
Alekperov predicted outflow of $1.2-1.3m from the country for purchase of equipment and different purposes. So, I have suspicions on EBRDs forecasts on 13%-inflation. We always discuss with the IMF an impact of inflation policy, wages, and oil prices on the inflation, Alekperov underlined. In 2006 it will be possible to maintain growth pace of inflation at 8-9%.
However, while discussion of the 2006 public budget the major remarks by he IMF were linked with rapid growth of public expenses and sharp rise in financial deficit in the non-oil sector. Such a rapid rise in expenses represents macro-economic risk and possible inflation impact.
Asian Development Bank (ADB) displayed more loyal attitude towards Azerbaijans position. On 23 February the ADB set up discussions with the Azerbaijani government on the results of estimation of the public management and private sector in the country, Рў During the discussions the deputy minister for economic development, Mikayil Jabbarov, put his claims on the data used while evaluation of the private sector.
He explained the partiality of the report with the use of outdated statistics data during the estimation of the report, which did not fully cover the countrys economy. The report cannot make Azerbaijan less attractive.
The report indicated the development of the private sector with low indices 0.1%, whereas the real figure was 6-8% and some times 14%, Jabbarov stressed. I think the investment appeal of the country will fall in connection with the publication of the ADB report, as on this criteria Azerbaijan takes a leading position not only I the region, but through out the world, the deputy minister said. The perfect legal system plays a priority role in the development of the private sector and the project will be implemented in this direction with BP soon.
The head of the Baku Office of the ADB, Mathew Westfall, agreed upon the claims, as in 2005 rise in the Gross domestic Product (GDP) made up 26.7%. According to estimations by the ADB, the economic growth comprised 30.2%.
Westfall said that the document was designed by consultants and experts of head office of the ADB in Manila on the base of general standards and data collected by the ADB experts in Azerbaijan. Westfall admits dynamic development of economy and work in this direction will continue. Nevertheless, the Board of Directors will adopt the report and it will be reconsidered every year. At the moment the working group is involve din the improvement of a report on the base of claims by the government. The version coordinated with Azerbaijan will be submitted the bank.
One of the stumbling-blocs was a methodology on monitoring of economies proposed by the WB. According to the statement by Arif Veliyev, the chairman of the State Statistics Committee, WB proposes to check up 2200 economies every quarter, while it would be more expedient to increase the figure to 4,000. Veliyev said that different indices came out from the WB methodology, while for the time being the bank has not given its consent to it change.
Similar researches were carried out in Azerbaijan by UNICEF in 2003. According to them, the death rate was indicated 4 times higher than the SSC official data, at the result of which Azerbaijan, by its human development level lowered from the 85-th place to 101, being behind Georgia and Armenia.
В"We voiced our disagreement with the final results and notified both UNICEF and the Azerbaijan Cabinet of Ministers. In this regard they were forced to indicate the SSC death rate data in the brochure issued, Veliyev noted.
The State Committee on Statistics with the assistance of the American non-governmental organization (NGO) Macro will set in mid-2006 to conducting researches of the demographic social statistics in Azerbaijan.
As to the IMF, it has been rendering technical assistance to the State Statistics Committee since 1993 on the methodic part. The experts of the IMF arrive in the country every quarter to get familiar with the national accountability system and they are mostly interested in the statistics.
Azerbaijan also have problems with ratings, as it still hesitates in the international ratings. The size of OECD rating conditions the access to foreign financing for the country and private sector. Now it is n the lowest level. Azerbaijan has carried out work over the reconsideration of the existing estimation for three years.
According to a recent statement by the Deputy Minister for Economic Development, for the time being Azerbaijan holds rating VI on OECD version. The country claims at increase of its rating as minimum to level IV, and even higher.
First we planned to visit Paris to consider the issue in a meeting of the credit agents of the OECD member-countries, while the discussions were delayed due to structural reform sin the Ministry of Economic Development, Jabbarov noted.
Generally, we are not lucky with the ratings. For instance, approving the ratings in January Fitch, which Azerbaijan has cooperated for many years, announced that further development of economy, in particular, maintenance of rush growth of economy, might lead to improvement of competition capability on increase of ratings, it is necessary to continue conduct of reforms, attraction of private investments and further development of industrial sector not related to oil production. The agency defined the rating of Azerbaijan as Р'Р'/Р' with a stable forecast, which yields the investment rating by 2 points.
According to Alekperov, the estimations by Fitch are too careful and slow. "In 2006 Fitch could increase them," he underlined. Azerbaijan has recently signed proposals and decided to invite another rating agency to Azerbaijan p Moodys. It is dealt with a 1-year contact with the budget of $40,000.