Budget in Azerbaijani Style - No Answers to Many Questions

The approved state budget of Azerbaijan for 2017 is, according to experts, the worst and most confusing in the past 10 years.

One of the uncertainties in particular is financing the Islamic Solidarity Games and competitions of Formula 1. In a year when the country will be the organizer of these two major events, the state budget will allocate only 38.6 million manat for sports, while in 2016, when only Formula 1 was held, sports was allocated 444.9 million manat.

Some explanations on the subject gave the Accounting Chamber, whose report indicated that to hold Islamic Solidarity Games and Formula 1 AZN 317 million 300 thousand was allocated.

However, these costs are distributed between different ministries and in the state budget there are no precise figures on this matter.

There are ambiguities in other areas. For example, the economist Rovshan Agayev said he did not understand the reasons for the reduction in 2017 of social protection expenditure in the amount of AZN 650 million.

"There is no explanation as to specific items of expenditure that are cut. There isn no answer on what social protection measures became unnecessary in 2017," he said.

Confusion is also related to the agricultural sector. If in 2016 to subsidize fertilizers, motor oil and fuel 155 600 000 manat was planned, in 2017, these expenses have been reduced to 148 million manat.

“However, it should be noted that in 2017, among other areas there are yet to be allocated grants for three new destinations - cotton, tobacco and silk. Logically, these costs were to be increased,” Agayev said.

Note that the reduction has also affected other social spheres. In particular, if in 2016 science was allocated 131.7 million manat, then in 2017 these expenditures are planned at the level of 118.5 million manat. It should be noted that spending on science accounts for only 0.7% of the state budget. At the time, the President of the National Academy of Sciences of Azerbaijan, deceased Mahmud Karimov noted that if spending on science is less than 2% of total budget expenditures, not any impact can be expected from science.

The costs of pre-school organizations are planned as 137.8 million manat (in 2016 AZN 157.4 million), vocational education - 23.1 million manat (in 2016 AZN 33.7 million).

Art and culture are allocated 120.8 million manat (in 2016 AZN 140.9 million), radio and television costs and printing costs are projected at 57.1 million manat (in 2016 AZN 66.9 million). Spending on hospitals is planned at the level of 340.9 million manat (in 2016 AZN 352.7 million).

Agayev said the Milli Majlis is a champion on the speed of the budget discussions. If you do not take into account the parliamentary committee meetings, the draft state budget for 2017 was discussed in two days and it took only 8 hours, while the world's parliaments discuss the draft budget in an average of 40-60 days.

In addition, Agayev believes the government needs to fundamentally change budget management.

Successful practices in other countries show that the center of the financial reform is long-term planning of the state budget, namely a clear identification of priority areas and funding sources.

"The primary planning mechanism is the transition to the state budget based on programs. In this case, the discussion is not around expenditure, but around the program objectives," he said.

As an example, he cited the expert opinion of the Accounting Chamber on the state budget 2017, which states that the amount of electricity produced by Azalternativenerzhi LLC, which operates within 4 years on the basis of the budgetary financial aid, is much less than the finance allocated for it.

The Chamber noted that in 2015 the company produced power totaling 492 thousand manat, while in the same year it was given six times more.

In addition, the maintenance of the State Agency on Alternative and Renewable Energy Sources is allocated 1.5 million manat.

"In fact, it is worth assessing this way the quality of indicators and the number of state institutions financed from the state budget."

Another example, in his opinion, was the Ministry of Communications and High Technologies. He said that immediately after cleaning the team of the former Minister the high cost of this sector allocated from the state budget was also overcome.

"In 2016, due to the costs it has been allocated 43.5 million manat, while in 2017 it decreased by 91.5% and is projected at 3.7 million manat. This means that for a long time every year this ministry received AZN 50-60 million of extra money and it was necessary to expel the Minister and his team to find this out."

Note that in general, the state budget revenues are projected at 15 billion 955 million manat (26% of GDP), a reduction compared to 2016 year amounted to 867 million manat (5.2%). Budget expenditures are projected at 16 billion 600 million. manat (27% of GDP), a reduction compared to the 2016 year by 1 billion 895 million manat (10.2%).    -----71D