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There are various figures on the financial capacity of the ongoing fight against the coronavirus pandemic, the costs associated with it, as well as the package allocated by the state for the affected poor and business. Therefore, in this article, we will try to investigate how much damage the pandemic has brought to the Azerbaijani economy and how much state support has been provided to the victims.
Eight days after the World Health Organization declared COVID-19 a global pandemic, on March 19, 2020, the President of the Republic of Azerbaijan issued an order[1] “on a number of measures to reduce the negative impact of the coronavirus (COVID-19) pandemic and, consequently, sharp fluctuations in world energy and stock markets on the economy of the Republic of Azerbaijan, macroeconomic stability, employment issues in the country, and businesses entities”. The order stated that 1 billion AZN should be allocated from the state budget of the Republic of Azerbaijan for 2020 to the Cabinet of Ministers to finance measures to reduce the negative effects of coronavirus in the abovementioned areas.
Speaking at a video conference[2] on the socio-economic results of the first quarter of 2020 on April 14, President Ilham Aliyev said: “The total support package for the coronavirus is estimated at 2.5 billion AZN. But it will be more than that. Recently, 97 million AZN was allocated from the President's reserve fund for the purchase of necessary equipment and supplies. It is planned to allocate another 150 million AZN by the end of the year. This does not belong to 2.5 billion AZN.”
Speaking at the opening of a newly built modular hospital[3] in Baku on May 7, President Ilham Aliyev noted: “People's health and social welfare come first. 3.5 billion AZN has been allocated for this purpose. A significant part of the salaries of about 700,000 people who lost their jobs in the areas most affected by the pandemic is paid by the state. For this purpose, 600,000 unemployed, low-income, and people earning money through informal employment are provided with financial assistance by the state.”
On the same day, Vice President Mehriban Aliyeva shared her views on the current state of COVID-19 in the form of an appeal[4] to the people, noting that the state has developed and implemented program packages worth more than 3 billion AZN to support small and medium businesses, as well as to provide social assistance to the population.
In a video conference initiated by the Asian Development Bank on June 1, President Ilham Aliyev said: “We have allocated more than € 2 billion (more than 3.8 billion AZN) to support the sectors of the economy affected by the pandemic, as well as to support unemployment, the unemployed, the poor, and even those involved in informal employment.”
As can be seen, there are different opinions in the media (from 2.5 billion to 3.8 billion AZN) on the number of funds allocated for the fight against the coronavirus pandemic. I would like to note that funds are allocated for this purpose from various sources. Leading among them are the state budget funds for 2020. In this regard, in an interview with local media on June 2, the Minister of Finance said[5]: “The main expenditures were directed to the health sector, which is understandable. At present, the state is taking great steps in this area. Such that the implementation of the quarantine regime, the training of doctors on these issues, the treatment of patients, the purchase of appropriate drugs and equipment, as well as the placement of people in quarantine, and keeping them in quarantine are costly. Undoubtedly, these costs were not taken into account in the state budget. But by reconsidering the priority of expenditures, we have already provided financial support for these expenditures. On the other hand, according to the order signed by the President, 1 billion AZN was allocated to eliminate the negative impact of the pandemic on the economy. Furthermore, 533 million AZN was recently allocated to various sectors of the economy. These funds were primarily directed to free assistance to small, medium, and micro entrepreneurs. In addition, certain funds have been transferred to the Ministry of Labor and Social Protection of the Population to provide assistance.”
The 533 million AZN cited by the Minister of Finance represents the number of funds allocated for this purpose from the state budget as of May 21, 2020. According to the Ministry[6], as of May 19, 2020, 533.257 million AZN was allocated and financed various areas from the funds provided in connection with the coronavirus pandemic in the expenditures of the state budget for 2020. The Cabinet of Ministers is carrying out financing several areas in connection with the Action Plan[7] “for the implementation of Presidential Order No. 1950 dated March 19, 2020, to support economic growth and entrepreneurship” (hereinafter - the Action Plan). In general, 159.757 million AZN was transferred on the basis of the orders of the Ministry of Economy in the mentioned directions, and 244 million AZN of budget expenditures were transferred to the Ministry of Labor and Social Protection of the Population designed for this purpose. As can be seen, the share of funds spent is 20-25 percent compared to the declared amounts. This can be seen in the table data dated April 4, 2020, prepared by the Cabinet of Ministers on the implementation of the activities envisaged in the Action Plan “for the implementation of Presidential Order No. 1950 dated April 19, 2020”. The table data is based on the Action Plan[8] approved on April 4, 2020, and the actual data is based on the data of the Ministry of Economy[9] and the Ministry of Finance[10] as of June 7, 2020.
Table 1. Comparison of planned and actual expenditures to be financed from the state budget under the Action Plan
Source: Cabinet of Ministers, Ministry of Finance, Ministry of Economy
As can be seen from the table data, the number of funds provided for financing from the state budget under the Action Plan was 865 million AZN, of which 65.4% was spent as of June 7, 2020. The balance of funds for this period amounted to 299.19 million AZN. During the implementation of the activities envisaged in the Action Plan, the amount of lump-sum payment in the amount of the subsistence minimum (190 AZN) to persons registered as unemployed in the State Employment Service exceeded 159 million AZN due to the fact that the number of unemployed was twice higher than planned. I would like to note that despite the fact that the expenditures in this direction were 3.27 times higher than planned, the allocated funds still did not meet the needs of all the unemployed. Such that the Ministry of Labor and Social Protection of Population[11] (MLSPP) refused to provide assistance to more than 635,000 unemployed people. The Minister of MLSPP explained this by the fact that the unemployed do not belong to the low-income group. However, the Action Plan clearly provided for the payment of these funds to persons registered as unemployed in the bodies of the State Employment Service.
As for the largest balance during the implementation of the Action Plan, 31.5 percent of the 280 million AZN allocated for providing financial support to vital passenger transport was 190.5 million AZN under this title. At the same time, out of the 215 million AZN provided for the payment of a certain part of the salary of employees working in the areas affected by the pandemic, 95.77 million AZN or 44.5 percent was actually spent. Out of 80 million AZN provided for financial support to individual (micro) entrepreneurs operating in the pandemic-affected areas, 61.54 million AZN or 76.9 percent was actually spent.
In addition, the Action Plan approved by the Cabinet of Ministers sets the amount of compensation to be financed from other sources. These amounts are presented in Table 2 below by their directions.
Table 2. Expenditures to be financed from other sources under the Action Plan
| Coverage(with thousand people) | Planned for funding from other sources (with million AZN) | ||
| Unemployment Insurance Fund (UIF), State Social Protection Fund (SSPF), Source unknown (SUK) | Execution status | ||
| Subsidization of loan interest on the existing loan portfolio in the amount of 1 billion AZN as of March 10, 2020, for business entities (including small and medium enterprises) operating in areas affected by the pandemic | - | 50 (SUK) | - |
| Expansion and acceleration of the implementation of the self-employment program implemented in cooperation with the Unemployment Insurance Fund, the United Nations Development Program, and the World Bank | 11 | 70 (UIF) | - |
| Expansion of the coverage of unemployment insurance payments and the creation of a proactive appointment mechanism | 20 | 20 (UIF) | - |
| Continuation of insurance payments and pensions during the special quarantine regime for persons whose unemployment insurance payments have expired but are not employed, and for those who have taken a break from vocational training courses, improvement of the co-financing of salaries program | 2 | 0.6 (UIF) | - |
| Use of 200 million AZN reserve of the State Social Protection Fund for 2019 in order to close the deficit and ensure the sustainability of social payments (pensions and benefits) to the population in the context of reduced social insurance premiums | - | 200 (SSPF) | - |
| Continuation of assistance to families (individuals) whose targeted state social assistance ends during the special quarantine regime until the end of the special quarantine regime and simplification of the appointment of targeted state social assistance during this period | 62 | 3 (SSPF) | - |
| Total | 343.6 | ||
Source: Action Plan on the implementation of the Presidential Decree No. 1950 dated March 19, 2020, of the Cabinet of Ministers on April 4, 2020
As can be seen from the table data, an additional 343.6 million AZN is planned to be allocated from the State Social Protection Fund, the Unemployment Insurance Fund, and other sources to improve the social situation of 95,000 low-income people. However, due to the lack of information on the implementation of the budget of the State Social Protection Fund and the Unemployment Insurance Fund for 2020, it was not possible to determine the actual level of spending.
Moreover, I would like to note that in addition to all this, President Ilham Aliyev issued an order[12] “on the allocation of funds for the supply of necessary medical equipment and other medical supplies in the framework of health measures against the coronavirus pandemic in the Republic of Azerbaijan” on April 9, and in order to prevent the spread of the coronavirus pandemic and strengthen the fight against it, 97 million AZN was allocated to the State Agency for Compulsory Medical Insurance from the President’s reserve fund envisaged in the 2020 state budget for the supply of necessary medical equipment and other medical supplies. Furthermore, according to the presidential order[13] “on additional measures to strengthen the fight against the coronavirus pandemic” dated April 7, 2020, 14.8 million AZN was allocated from the state budget for the construction of 6 modular hospitals across the country. As can be seen, the funds allocated for the elimination of the effects of the pandemic and the support programs from virtually all sources are less than 1 billion AZN. In addition, as for the damage caused by the pandemic to the economy, at a briefing at the Operational Headquarters under the Cabinet of Ministers of the Republic of Azerbaijan, the Minister of Economy, Mikayil Jabbarov, said that the coronavirus pandemic causes great damage to the country's economy. It is difficult to calculate these figures in full detail. Daily losses are about 120-150 million AZN.[14] Justifying the opening of the economy as soon as possible, the minister did not disclose the total amount of damage after the full recovery of the economy. However, Giorgi Kakauridze, the Deputy Minister of Finance of neighboring Georgia, told at a parliamentary committee meeting that "his country has lost $588 million due to the coronavirus pandemic.”[15]
Gubad Ibadoglu
[1] https://president.az/articles/36228
[2] https://president.az/articles/36526
[3] https://apa.az/az/sosial_xeberler/Bakida-modul-tipli-ilk-xstxana-kompleksi-acilib-colorredFOTOcolor-colorredYENILNIBcolor-585466
[4] https://mehriban-aliyeva.az/news/node/848331
[5] https://report.az/maliyye/budce-xerclerinin-teyinati-prioritetler-uzre-deyisdirilib/
[6] http://maliyye.gov.az/news/5459/pandemiyadan-zerer-cekmis-sahelere-dovlet-budcesinden-533-milyon-manatdan-cox-maliyye-desteyi-gosterilib
[7] https://cabmin.gov.az/az/document/4367/
[8] https://cabmin.gov.az/az/document/4367/
[9] http://maliyye.gov.az/news/5459/pandemiyadan-zerer-cekmis-sahelere-dovlet-budcesinden-533-milyon-manatdan-cox-maliyye-desteyi-gosterilib
[10] https://www.economy.gov.az/article/koronavirus-covi-d-19-pandemiyasindan-zerer-chekmish-sahibkarlara-dovlet-maliyye-desteyinin-gosterilmesi-davam-etdirilir5/30968
[11] https://apa.az/az/sosial_xeberler/Sahil-Babayev-Birdflik-odm-alanlardan-8-faizi-20-yasa-qdr-olanlardir-585208
[12] https://azertag.az/xeber/Prezident_Ilham_Aliyev_koronavirusla_mubarizenin_guclendirilmesi_meqsedile_97_milyon_manat_ayirib-1458425
[13] https://apa.az/az/sosial_xeberler/Koronavirusa-gor-modul-tipli-6-xstxana-qurasdirilacaq-Prezident-bu-mqsdl-148-milyon-manat-ayirib-580358
[14] https://vergiler.az/news/news/8283.html
[15] https://report.az/region/gurcustan-pandemiyaya-gore-588-milyon-dollar-itirib/
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