State budget 2006 implemented on 90 per cent in first half of year

The Ministry of Finances of Azerbaijan promulgated about the implementation of the state budget in the first half of the year. It should be mentioned that State Budget 2006 commanded everybodys respect by its parameters, and it is not likely to see such a significant increase in the state burse over a year. Thus, the volume of state revenues in 2006 was primordially determined at the volume of 3.4 b. manats (23.6 per cent out of Azerbaijan`s GDP). This volume exceeded the forecast 2005 on 67.8 per cent. The volume of the state expenses was determined at the volume of 3.6 b. manats (24.7 per cent out of GDP). The increase in expenses made up 62.8 per cent, and the budgeted deficit correspondingly made up 158 m. manats, or 1.1 per cent out of GDP.

But over the first four months 2006, owing to the high oil prices, it was evident that revenues would significantly exceed its forecasts, and such moments like the establishment of the Emergency Ministry and the Ministry of Defense Industry, the starting of the activity of the Ministries of Culture and Sports, Youth and Tourism, as well as the rise in prices on some kinds of mineral oil would cause the increase (rise) in the supply.

Therefore, it was necessary to move amendments to the state budget, and as a result of it, the law On Moving Amendments and Changes to State Budget 2006 was adopted. Thus, according to the renew parameters of State Budget 2006, its revenues and expenses were raised to the sum of 430.5 m. manats, or 12.6 per cent. As a result of it the budget revenues made up 3.837 b. manats, its expenses - 4.025 b. manats, but the budgeted deficit remained unchanged at the level of 188 m. manats (1.15 per cent out of GDP).

Prior to begin to analyze the implementation of the state budget in the first half of the year, we should cite the macroeconomics and financial data spread by the Finance Ministry which was significantly improved over the period January-July 2006 versus the corresponding period of the last year. For example, the volume of GDP was raised by 36.3 per cent and made up 7146.4 m. Manats. GDP per capita made up 856 AZN ($943.9). This showing is on 34.7 per cent more than the corresponding indicator of the last year. The rate of growth in revenues and expenses of the budget twice exceeded the tempo of growth of GDP that caused the significant increase of the budget ration in GDP.

Over this period 2626.7 m. (that is on 7.9 per cent more than over the corresponding period of 2005) manats was invested to the social sphere and the economy of the country by different financial sources. The volume of building and assembly works was raised by 10 per cent and made up 1372.1 m. manats. The increase in turn over made up 12.1 per cent (2698.2 m. manats), the volume of pay services which were rendered to the population was raised by 34.6 per cent and made up 603.6 m. manats, and the populations bank deposits to June, 2006 was raised by 36.8 per cent and reached 581.4 m. manats.

The average salary of the employed population was raised by 20.8 per cent versus the first half of 2005 and made up 135.1 AZN, and the cash income per capita was raised by 18.3 per cent and made up 580.7 manats.

It is evident that the favourable national measure positively told on the implementation of the budget in the period. The forecast on profits of State Budget 2006 which was determined at the rate of 1516.1 m. was implemented on 102.1 per cent. These showings were raised by 69.5 per cent (634.2 m. manats). At present the profitable part of the State Treasure is replenished quite well and traditional stable sources prevail in it. Thus, 66 per cent or 1027.1 m. manats out of the total budget revenues felt at the Taxes Ministry, 16.1 per cent or 249.5 m. manats at the State Customs Committee, 14.6 per cent or 226 m. manats - at the State Oil Fund, 2.5 per cent (39.4 m. manats) - pay services of the budget organizations, 0.2 per cent (3.8 m. manats) other sources, and 0.1 per cent (1.5 m. manats ) the State Property Committee.

If you saw the structure of tax funds, then you could notice that the weight of VAT in the structure of the budget revenues made up 2.4 per cent. The forecast on VAT was implemented on 100.4 per cent, and 346.2 m. manats were transferred to the state budget. The tax bodies collected 174.4 m. manats (on 6.2 per cent more versus over the corresponding period of 2005), and the customs bodies collected 171.8 m. manats (on 59.2 per cent more versus over the corresponding period of 2005). The forecast on the excise tax was implemented on 104 per cent (68.5 m. manats were transferred to the budget). But the key portion of the replenishment of the state budget is the profits tax which volume made up 431.1 m. manats (on 269.8 m. manats more in comparison with the first half of 2005.

The state budgets expenses over the first half of 2006 made up 20.2 per cent out of GDP and were raised almost by 3 per cent versus the corresponding showing of 2005. The budget surplus made up 101.2 m. manats versus the corresponding showing of 2005.

Implementation of State Budget on Different Sectors

(in ths. AZM)

The implementation of such a budget item as expenses on industry, construction, and natural resources in the second table could arouse the readers particular interest. It was implemented on 424 per cent versus the corresponding period of the last year. It is not secret that it became possible owing to the construction boom that spread the capital and the regions. However, the budget expenses on transport and telecommunications over January-July 2006 made up only a half of the last years showing.

The budget surplus again, but it was expected to a certain extent. In any case the state budget deficit bring troubles most of all, since the budget surplus can be removed easily. Appeals to spend these means on social needs, to send the increased budget assignments to review salaries of the employees of the budget spheres in particular are put into effect. Since July 2006, according to decrees of the President, salaries of military men, officers of the law machinery, officers of the Minister of Interior, military men and civil employees of the State Frontier Service, as well as salaries of employees of some musical collectives who are on the state subsidy were raised. It is not excluded that the amount of the minimum wage will be raised up to 50 AZN.