Budget Deficit-2021 May Be within AZN 7 Billion

Baku /23.12.20 / Turan: On December 21, President Ilham Aliyev submitted the draft state budget of Azerbaijan for 2021 to the Milli Majlis.

According to the project, the revenues of the state budget of the Republic of Azerbaijan in 2021 will amount to 25,427.0 million manats. This, amounting to 33.6% of GDP compared to the forecast for 2020, is 1,303.0 million manats or 5.4% more.

State budget expenditures for 2021 are projected at 28,543.0 million manats (the share in GDP is 37.7%). This is 1,050.8 million manats or 3.8% more than in 2020.

Current expenditures included in the structure of state budget expenditures for next year will amount to 63.1 percent of total expenditures or AZN 18014.0 million, capital expenditures - 29.2 percent or AZN 8 330.3 million, and 7.7% of expenses will be related to servicing public debt, or 2 198.8 million manats.

Socially oriented expenditures of the state budget for 2021 are projected at 11,111.9 million manats. This is 563.8 million manats or 5.3% more than in 2020.

The upper limit of the state budget deficit in 2021 is planned at the level of 3,116.0 million manats. This is 0.6% less than in 2020.

The draft budget noted that 2.2 billion manat will be allocated from the state budget for the restoration and reconstruction of the territories liberated from occupation of Azerbaijan next year.

Defense spending also increased the following year. So, for defense and national security expenditures, the maintenance of the judiciary, law enforcement agencies and the prosecutor's office next year, funds are provided in the amount of 23.4 percent of the state budget for 2021, or 6678.6 million manat. This is 937.7 million manat or 16.3 percent more than in 2020.

In the state budget of Azerbaijan for the next year, the price of 1 barrel of oil is taken at $ 40.

The upper limit of the transfer from the State Oil Fund of the Azerbaijan Republic to the state budget is envisaged in the amount of 12,200.0 million manats.

How do experts assess the budget for next year?

Member of the Milli Majlis Committee on Economic Policy, Industry and Entrepreneurship Ulvi Guliyev told Turan that there is growth in the budget itself: “There is an increase in the budget by 1.3 billion. It is assumed that the budget deficit may be larger. But this will not create any economic problems. Gold and foreign exchange reserves are sufficient for our macroeconomic stability. A certain part of the funds will go to the budget and from privatization. The funds will also come from tax improvements. All this will give a synergistic effect so that more funds are allocated from the budget for Karabakh."

The MP believes that one of the most important parts of the draft budget is a part of the expenses allocated for the restoration of the territories liberated from the occupation. 2.2 billion manats has been allocated for these purposes. These are mainly infrastructure projects. Naturally, in order to build an economy, it is important to first create an economic environment. To take into account the economic environment, a complete rehabilitation of the infrastructure is required. These are roads, utilities, and energy. Houses must be built there, and cities restored. But we will not stop there. It's just the foundation. The foundation will be created for a complete economic recovery, and on this foundation, development is already expected from both the state and business.

“As soon as conditions are created, rapid growth will occur in the Karabakh region, I would even say, more than the growth of Azerbaijan’s GDP,” he said.

The MP noted that in comparison with the previous draft, in the new draft budget, the oil price for the next year was taken by $ 5 more: "The oil price has increased from $ 35 to $ 40. This will have a special impact on the budget of Azerbaijan next year."

U. Guliyev said that all the planned socially-oriented projects will be implemented: “We have always placed social policy in the first place. But there are also projects of secondary importance. These projects will now be reviewed. "

As for the increase in defense spending, the MP said that defense spending in Azerbaijan should be increased: “We must be ready in any form. Yes, we have won a complete victory, and all the questions raised by the President have been resolved, but, as the Russians say, if you want peace, prepare for war. We have significant opportunities for this. ”

U. Guliyev stressed that social issues in the budget of Azerbaijan have always been the most important: "Therefore, the subsistence minimum rose by 3.1%. Naturally, we are trying to prevent inflation and keep it at the level of 2.5-3%. We have success in the fight against inflation. Inflation and unemployment are closely related to each other. We are implementing programs related to unemployment, but, unfortunately, like in the rest of the world, today Azerbaijan is quarantined due to the coronavirus pandemic. But there is one interesting question. The Karabakh region is being rebuilt anew, and it will need enough workforce. Naturally, unemployment in the region, a country where an economic leap is taking place, is rapidly decreasing. "

The MP noted that the main goal of the country is social policy: “It is developing in Azerbaijan, but the existing quarantine measures also affect our economy. True, compared to other countries, the situation is not so bad, but we also face losses. In general, there is pragmatism in the policy of Mr. President, and this pragmatism helps to protect the economy of Azerbaijan from disasters. Azerbaijan is among the 10 countries in the world that have suffered the least losses from the impact of the coronavirus. We also have development”.

Economist Natiq Jafarli told Radio Azadlig that the submission of the draft budget for next year was late.

"The main reason for this delay was the 44-day Karabakh war, as well as the creation of a general idea of ​​what is to be done in the territories liberated from the occupation," he said.

As for the increase in oil prices in the budget, the expert noted that there was a conservative approach to this issue: "The initial oil price was raised from $ 35 to $ 40. This mainly concerns the budget of the Oil Fund and affects the consolidated budget. That is, the oil price does not have a direct impact on the revenue side of the budget. This year the Oil Fund has a large deficit. Since 13.2 billion manat was transferred to the budget, there were also extra-budgetary expenditures. But this year the revenues of the Oil Fund were not so high. At best, they were about 7.5 billion manat. It is expected that the deficit will be about 5 billion. Therefore, the question of how far to take oil is more of interest to the budget of the Oil Fund. In fact, if major cataclysms do not occur, then the calculation of the oil price $ 40 is normal and allows the authorities to take certain maneuvers."

N. Jafarli also touched upon the budget deficit. In his opinion, there will be problems with the budget deficit: “If we take the consolidated budget, then the budget deficit is expected to be about 7.5 billion. The Ministry of Finance has an explanation that this will be covered by privatization or a loan. The Ministry of Finance has an explanation that this will be closed either through privatization or through borrowing. By the way, it is planned to issue about 2 billion of domestic debt bonds. But I do not think that next year in a very short time it will be possible to go for privatization, costing billions of manats."

According to the economist, the budget deficit will be closed due to devaluation: “Given that the Ministry of Finance has increased pressure on the manat, the influence on the exchange rate has increased, devaluation is likely to be a way to close the budget deficit,” he said. Because in case of devaluation, the amount of currency that will be withdrawn from the Oil Fund will decrease, but the manat equivalent can be increased. Therefore, figuratively speaking, this budget smells devaluation."

According to Jafarli, there is a certain increase in social spending, and this is due to the damage caused by the pandemic: “Until February 1, there is a quarantine regime, and for this period, funds should be provided for the provision of certain social benefits. Therefore, socially oriented expenditures amount to about 11.1 billion. This includes salaries, scholarships and even medicine and food assistance."

The economist noted that, in general, the likelihood of devaluation has increased, and the implementation of budget parameters for next year does not look so realistic.

“It is quite possible that in the middle of next year the budget will be revised in accordance with bad tradition, and additions and changes will be made,” Jafarli said. —71B—