An International Monetary Fund (IMF) staff mission visited Baku on November 8-20, to discuss policies and prospects for the Azerbaijani economy, in preparation for the next Article IV Consultation mission, tentatively planned for the late February 2013. The IMF team met with senior government officials and non-governmental representatives.
At the conclusion of the visit, the mission chief for Azerbaijan, Mr. Almargozi, made the following remarks:
“The near term growth prospects are generally favorable. Non-oil growth largely driven by public spending – could reach 8% in 2013 and more than offset decline in oil output. Twelve month inflation has recently declined but could increase in 2013, with sustained public spending and the pass-through of recent increases in global food prices. Risks to the global and regional outlook are titled to the downside but upside risks in the world, oil supply could be triggered by the geopolitical situation.
Reducing the 2013 non-oil deficit relative to the 2012 outturn by prioritizing investments will help contain risks to macroeconomic stability and strengthen the policy buffer to face a potential deterioration in the global economy. Revamping the fiscal framework by declining spending from current oil prices to bringing more predictability and credibility in fiscal policy, will be key for fostering private investment. The IMF stands ready to provide technical assistance on oil revenue management and pension reforms.
“The Central bank will need to tighten monetary policy if demand pressures emerge from government spending and the recent pick up in credit growth. Policy tools are limited and thus strengthening the interest rate transmission mechanism, while allowing greater exchange flexibility, will help better control inflation volatility over the long term.
“The increase in the minimum capital requirement is a welcome step if combined with new non-performing loans and loan-lost provisions regulations. Prudential measures could help control the pace of credit, particularly on consumer lending. Though preparations are still on going, the missions regrets further delays in the joint IMF/World Bank Financial Sector Assessment Program at this crucial time for the banking system. As agreed with the authorities, the FSAP will take place in early 2014.
“Deep structural will be crucial to develop a competitive private sector led non-oil economy able to foster exports, create jobs, and sustain diversification. Implementation of the new customs code, finalization of the WTO accession , and easing of barriers for competition will be key to develop a new growth will less dependence from oil.” –0--
Economics
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Azerbaijan’s economy, which is heavily dependent on oil revenues, faces a stark warning in the 2021 report by Carbon Tracker titled “Beyond the Oil States: The Urgent Need to Reduce Dependence on Oil in the Context of the Energy Transition.” The report ranks Azerbaijan among the most vulnerable oil-dependent countries, placing it in the "5th group" — a category reserved for nations expected to experience a decline in oil and gas revenues exceeding 40% over the next decade. This group includes Angola, Bahrain, Timor-Leste, Equatorial Guinea, Oman, and South Sudan, highlighting shared economic risks for these states.
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Azerbaijan's non-oil and gas exports rose 3.5% year-on-year to $2.8 billion during the first ten months of 2024, the Center for Analysis of Economic Reforms and Communication (CAERC) reported in its November "Export Review."
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Azerbaijan Railways CJSC (ADY) will modify the schedules for commuter and domestic trains in line with the Cabinet of Ministers' decision to adjust work and rest days in November, aiming to ensure safe and comfortable travel during the COP29 event, the company announced.
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In Azerbaijan, the government has increasingly relied on tax exemptions for imported goods as a tool to stabilize domestic market prices. The exemption from the 18% VAT on wheat imports, extended this year, exemplifies this approach. New measures have also been introduced, including tax relief on imports of electric vehicle chargers, while exemptions for high-cost medications are currently under discussion. Notably, defense imports continue to be free from taxes and customs duties.
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