Does Azerbaijan Need a New Central Bank Building for 637 Million Manats?

The allocation of 637 million manats for the construction of a new building for the Central Bank of Azerbaijan (CBA) has sparked significant debate. Located in Baku's Nizami district, the new CBA administrative building project is a major financial undertaking. The contract with the head contractor stipulates that 242.1 million manats and an additional 39.8 million manats are allocated for other capital investments not included in the construction estimate.

Within the framework of the contract with the general contractor, 355.1 million manats will be allocated for the construction work. Furthermore, 132.9 million manats will be spent on equipping the Treasury Center with appropriate equipment and outfitting the administrative building with furniture and other necessary apparatus. The total amount of funds spent and planned for expenditure amounts to 636.99 million manats.

Economist Natig Jafarli raised concerns about this expenditure during the program "A Difficult Question." Jafarli emphasized that the construction of such facilities should be justified through detailed calculations presented to either parliament or the public. He pointed out that it is essential to understand the need for a new building, the reasons driving this necessity, and the economic feasibility of such a significant investment. However, according to Jafarli, none of these justifications have been provided.

"It is unlikely that the CBA staff has expanded to an extent that necessitates a new office building or that a new building would significantly affect the working hours or efficiency of the CBA," Jafarli stated. "Does Azerbaijan need a new Central Bank building for 637 million manats? The question is rhetorical," he added, emphasizing that the primary concern is whether this expenditure will yield any return on investment.

Since 2015, the CBA has struggled to transition to a floating exchange rate for the manat, establish a functional currency exchange, and implement effective mechanisms for regulating inflation. While it might be unfair to place all the blame on the CBA, the construction of a new office building for 637 million manats seems questionable in this context.

Jafarli argued that the construction project could be more understandable if it created tangible economic opportunities, such as involving local companies in the project, purchasing domestically produced equipment, and utilizing local raw materials. "But everything will be purchased from abroad, and the funds will also flow abroad. How much of these 637 million manats will end up going overseas? That’s the question," he noted.

As the debate continues, the justification for such a significant expenditure remains under scrutiny, raising questions about the prioritization of resources in Azerbaijan's current economic climate.