Azerbaijan-WB: Framework Agreement on Partnership Actuated

On January 28 a team of the World Bank and the International Monetary Fund is beginning a week’s talks with the Azerbaijani government on further cooperation and financing of projects previously reached with the official Baku.

According to various sources it comes to financing in the amount of 4 billion dollars – 3 billion from the World Bank and 1 billion from the IMF. Earlier, informed sources reported that Baku requested the World Bank to provide a higher amount - 8 billion USD.

According to Turan, the current visit is based on the framework document of the Partnership (CPF) with Azerbaijan for 2016-2020. It was approved on July 21, 2015 by the Board of Directors of the World Bank, and published on August 4. CPF is designed to regulate the operations division of WB - the International Bank for Reconstruction and Development (IBRD), International Finance Corporation (IFC) and Multilateral Agency for Investment Guarantee (MIGA) to support sustainable, inclusive and private sector focused development in Azerbaijan.

The document states reduction of poverty in the country to 5% of the population with the expansion of the middle class from 4 to 29%. In the document of 118 pages the private sector plays a central role in the new economic model of Azerbaijan in conditions of low oil prices.

According to the report, real GDP growth in 2015 will be 1.5%, in 2016 - 2.6%, 2017 - 2.7%.

Oil GDP in 2015 is projected at 1.5%, in 2016 - 1.0%, in 2017 - 1.0%.

Non-oil GDP after prolonged annual growth range of 9% is to fall to 3.6% in 2015, in 2016 - 3.8% and in 2017 - 3.9%.

GDP per capita dropped from $ 7,938 in 2014 to $ 5,447 in 2015, and it will further increase to $ 5.778 in 2016 and to $ 6,094 in 2017.

Inflation in 2015 will be double-digit - 10.0%, in 2016 - 4.6%, in 2017 - 3.5%.

Overall fiscal balance for the first time in three years will be in the red: in 2015 - 5.1 billion manat, in 2016 - 2.9 billion manat and in 2017 - 1.2 billion manat.

Exports of goods and services will decline from 47.1 billion manat in 2014 to 43.7 billion manat in 2015 and further to 42.6 billion manat in 2016 and 42.0 billion manat in 2017.

Imports of goods and services will grow to 26.8 billion manat in 2014, to 34.2 billion manat in 2015 and then decline to 30.7 billion manat in 2016 and then to 28.7 billion manat in 2017 .

Total public sector debt will grow by 100 million manat in 2014 to 14.5 billion manat in 2015, 14.6 billion manat in 2016 and 14.6 billion manat in 2017.

Nominal GDP will decrease from 58.9 billion manat in 2014 to 52.6 billion manat in 2015, and then it will be 56.5 billion manat in 2016 and 60.4 billion manat in 2017.

Assets of the oil sector will be reduced from $ 37.104 billion in 2014 to $ 34.813 billion in 2015, to $ 33.595 billion in 2016 and to $ 33.172 billion in 2017. 

The framework document was finally made after consideration by the WB and IMF of the Financial Sector Stability Assessment (FSSA) of Azerbaijan, which was held on 2-17 March 2015 immediately after the devaluation of the manat. Particular attention was paid to the legal, regulatory and supervisory issues, basic financial services, including banking and insurance system, the capital market and the mortgage, and the availability of financial resources.

In June, the head of the IMF mission Raja Almarzoghi said that the conclusions of the IMF provide recommendations on the situation after the devaluation of the manat against the dollarization of the economy, for actions about investors changing AZN deposits for dollars, as well as measures to be taken by Azerbaijan Deposit Insurance Fund.

According to Turan, WB currently implementing 51 projects in Azerbaijan has allocated loans totaling $ 3.6 billion. 35 of them have already been completed, and the implementation of 16 continues. The IMF allocated loans totaling $ 363 million before 2009. Further funding was suspended at the initiative of the Azerbaijani side. -0-