MONEY SAVED UNDER IBTA-2 FOUND THEIR APPLICATION

Along with the conclusion of agreements on new joint projects the Azerbaijani government and the World Bank are concluding the use of the old credit program on Institutional Building Technical Assistance (IBTA-2). Following the completion of the IBTA-2 project on 30 June 2006, a management team of the project will also be broken up, as restructured part of IBTA-2 credit ($5.14), which is directed at fighting with the bird flu, was given to management of the State Agency for Rural Credits.

The IBTA-2 project was adopted on 19 June in 2002. $5.1 million is left unspent from the total 7.470 SDR ($10.6m) allocated for IBTA-2.

The components of the project include the treasury automation, assistance in the implementation of the law on State Purchases, upgrade of the Accountancy Chamber, monitoring of expenses for poverty reduction, development of state investment program, provision of transparency and financial discipline in the communal sector, improvement of business-climate, payment of consults services in privatization of water and gas supply system.

The remainder of the credit resulted due to refusal from the implementation of some components of the project, including the legal consultations on privatization of the water and gas supply system, consultations on improvement of the business climate, development of employment strategy. Thus, despite the initial budget of IBTA-2 was adopted in the amount of 7‚470m SDR was $9‚450m in 2002, it now comprises over $11, due to difference in rates of the USD and SDR.

The sides did not easily came to a conclusion that the saved money should be directed at fighting with bird flu. Earlier the World Bank proposed to return the saved part of the credit. However, the government then was unwilling to depart with the privileged credit resources and proposed to inject some new components in the project. The proposals concerned the development of a new tax regime for sate oil companies, strengthening of the control and rational use of budget funds, as well as improvement of the budgetary legislation.

Part of funds will also be directed at the establishment of the electron government and in this case the Ministry of Communications and Information Technologies. Another part was allocated for the Ministry of Ecology and Natural Resources on treatment of the oil and gas polluted area in Absheron peninsular. The Accountancy Chamber of Azerbaijan was also among the beneficiaries of the project on Technical Assistance to Institution Development. In March 2004 the consultants of the Australian alliance IDP/Stanton Partners held annual consultations under IBTA-II and they asserted that opinion on the necessity of conduct of structural changes. $803,000 were directed in this respect, whereas $80,000 was allocated for the establishment of the communication system with the Accountancy Chamber.

These directions were selected by the government, however, the bank did not give its approval for financing. It was the WB to take the final resolution. Early 2006 the government differed for its abruptness, refusing from the use of the funds and was going to return them to the bank. The governments logic is clear in general: to make the cooperation with the bank very applicable, getting rid of loans for technical assistance which in mid-1990s were needed as natural accompany for difficult infrastructure projects. To be strict, the government considered necessary to update the program on cooperation, supplementing it with new projects, which the budget is no condition to finance.

The resolution of the government was a fire without warning for the World Bank. The WB experts were indignant on the governments resolution on refusal from privileged credits, on condition that further the country will receive in the limited amount and take credits on commercial terms. Thus, talks on perspectives of IBTA-2 were conducted over the second half of 2005 first quarter of 2006. The unanticipated situation relaxed the situation: in connection with the danger of bird flu the government refused from an idea of cessation of the project and went to restructuring of the vacant part of the credit.

Late this March the Board of Directors of the World Bank approved $5.1m for Azerbaijan for prophylactics and fighting with bird flu. The WB funds will be directed at the improvement of the veterinary service and human health provision. It is planned to strengthen measures on diagnosis, observation over sick animals, development of mechanisms on payment of compensation to poultries. Moreover, it is also planned to purchase necessary equipment and medicine for conduct of observation, diagnosis, medical services to population. The money will be directed at increase of pubic awareness about bird flu related risks, as well as expenses linked with the management of this product. Thus, the credit is allocated for strengthening of technical basis of the State Veterinary Service and 75% of all funds will be spent on purchase of equipment.

The project is part of projects for emergency situations and was developed too fast and adopted in the shortest period. The project is private and independent, while Ministry of Agriculture is the project beneficiary. The State Veterinary Service of the Agriculture Ministry said that the World Bank has set up preparations for the tender on distribution of contractors within the framework of the project. In its turn the State Veterinary Service has submitted to the WB a list of necessary equipment and medicine.

As a result, the project on Institutional Building Technical Assistance covered only 4 out of 10 components. They include; strengthening of the state management, control over the state financial expenditures, reforms of social expenditures and project management.

The State treasury of Azerbaijan is finishing automation of regional offices, Trend reports with reference to officials of the workgroup for WBs IBTA-II project. This automated system is put in operation by the end of 2006, preceded by wide-scale training of personnel. In the aims of the project USAID issued a $2.9mln grant for software purchase. Hardware is purchased at IBTA-IIs funds of $2.85mln. In general, the treasury automation costs some $6mln. Connecting treasurys head office to 86 regional offices ensures control over target use of budget funds and allows define priority-driven spheres for budgetary financing.

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