Budget decreases, defense spending increases
In the upcoming fiscal year of 2024, Azerbaijan is expected to witness a decrease in its state budget revenues and expenditures. Projections indicate that revenues will amount to 33.765 billion Manats, while expenditures will total 36.355 billion Manats. Compared to the approved forecasts for 2023, these figures represent a decrease of 0.4 percent and 0.7 percent, respectively. Notably, the 2024 state budget allocates a 6 percent increase in funding for defense and national security, totaling 6.421 billion Manats. The Cabinet of Ministers has already given its nod to the draft state budget for the coming year.
In the revised budget for 2023, there was also an increase in defense and security spending. Some experts have pointed out that, in parallel with these defense expenditures, funding for social protection programs has seen only marginal growth.
Meanwhile, the draft budget for the upcoming year shows an increase in transfers from the Oil Fund, despite the government's stated intention to transition from an oil-based economy to a non-oil one.
The Ministry of Finance underscores concerns regarding the Armenian government's approach to the peace process and the observed separatist tendencies in the region, indicating that these factors threaten peace and stability. As a response, the 2024 state budget outlines the allocation of 3 billion Manats for bolstering the military's material and technical capabilities.
The Ministry further states that the budget project includes 4.542.2 billion Manats for social protection and social security expenditures, representing a 5 percent increase for the coming year.
Mazahir Efendiyev, a member of the committee on Economic Policy, Industry, and Entrepreneurship of the Milli Majlis, in an interview with Turan highlights the importance of increasing security spending in 2024 to ensure peace in the South Caucasus, aligning with President Ilham Aliyev's commitment to provide necessary funding for the Azerbaijani army.
Economist Natig Jafarli in an interview with Radio Azadlig, emphasizes the objective need for heightened defense spending in 2024, particularly in light of potential border delimitation and demarcation efforts with Armenia and the aftermath of recent operations in the Khankendi region.
Regarding Social Security spending, Jafarli notes a 5 percent increase, which falls short of expectations given the official food inflation rate of 14 percent. He suggests that while nominal incomes may rise, real incomes could decline due to inflationary pressures.
Lastly, the increase in transfers from the Oil Fund to the budget underscores Azerbaijan's continued reliance on oil revenues, raising questions about the country's ability to transition to a more sustainable economic model under the current management structure. The oil sector is projected to account for a significant portion of the 2024 budget, highlighting the ongoing challenge of reducing dependence on this sector.