"Azerbaijan has fallen into an oil trap and its economy is not growing”
The State Oil Fund of Azerbaijan (SOFAR) projects a 26.1% decrease in budget revenues for the upcoming year, totaling 12,073.3 million manats, as compared to the forecasted figures for the current year. This comes in conjunction with a forecasted increase of 8.9% in budget expenditures, reaching 12,900.2 million manats, according to the SOFAR budget forecast for 2024, approved by President Ilham Aliyev.
The anticipated budget deficit for 2024 is set at 788 million 730.5 thousand manats, a significant shift from the projected surplus of 4 billion 487 million 463.5 thousand Manats for the current year. The figures are calculated based on an average oil price assumption of $60 per barrel.
Transfers from SOFAR to the state budget of Azerbaijan for 2024 are expected to reach 12 billion 781 million Manats, representing 99.4% of the fund's expenditures for the upcoming year, according to the Ministry of Finance.
The decline in revenues from the "Azeri-Chirag-Gunashli" (ACG) block of deposits is noted as a contributing factor, with a decrease of $6,353.8 million, constituting a 30.6% decline year-on-year. Despite this, Finance Minister Samir Sharifov reported a significant increase in non-oil sector revenues to the state budget, exceeding 1 billion Manats.
Sharifov acknowledged the need to increase the transfer from the fund to meet national priorities, including the reconstruction of liberated territories, economic reintegration, and defense capabilities. The projected increase in transfer amounts to 1 billion Manats compared to the current year.
However, experts caution that the oil sector remains a cornerstone of budget revenues, notwithstanding efforts to diversify the economy. Azerbaijan's gold currency reserves, reaching $68.7 billion, are seen as a robust position from a macroeconomic standpoint.
In an interview with Turan, MP Rufat Guliyev highlighted the government's commitment to socially oriented budget expenditures, defense capabilities, and infrastructure projects in the Karabakh program, supported by the country's financial capabilities.
Economist Rashad Hasanov, in a comment for Radio Azadlig, suggested that despite the projected decrease in SOFAR revenues, the actual decrease may not materialize, given the forecasted oil price of $60 per barrel, while expressing optimism for oil prices to exceed $80.
Critics argue that Azerbaijan faces economic challenges, with stagnant growth and concerns about an overreliance on oil revenues. Hasanov attributes the fiscal expansion to the state budget's 20% increase in 2023, highlighting the economic growth potential and the need for a more liberal economic environment to foster non-oil sector development.