Lifebuoy for IBA at Expense of Taxpayers

Accounting Chamber of Azerbaijan recommended sending a bill to the parliament for discussion, proposing amendments to the state budget for the current year.

Discussions on this matter were held during the meeting of the supreme body of parliamentary control. As the Minister of Finance Samir Sharifov said during the discussion of the bill at a meeting of the Parliamentary Committee on Economic Policy, Industry and Entrepreneurship, the revision of the state budget of Azerbaijan for the current year is caused by the need to ensure the stability of the banking and financial system. Among other reasons, the minister also called for the need to regulate the external and internal obligations of our country.

In the revised version of the country's main financial document, revenues are projected at 16.77 billion manat, which is 3.1% more than the primary forecast for this year. As for expenses, they were determined at the level of 17.94 billion manat, which is by 1.04 billion manat, or 6.2% more compared to the initial forecasts. The increase in the item of expenditure will lead to a half-billion increase (+ 18% to projections) of the state budget deficit.

As part of the revision of the main fiscal law, it is planned to raise the upper limit for external borrowing up to 4.5 billion manat for the issue of Eurobonds by the International Bank of Azerbaijan (IBA). Another reason for increasing the state budget expenditures is also called regulation of expenses for maintaining kindergartens on the balance of the state, as well as financial support for the process of creating new kindergartens in cities and regions of the country. The increase in expenses is also connected with the allocation of additional funds to the Azerbaijan Deposit Insurance Fund and SOCAR. In addition, the state will allocate approximately 4 billion manat to restructure the external obligations of the IBA.

At the end of the meeting, the bill on the revision of the state budget for 2017 was recommended for discussion at the plenary session of the Milli Majlis. The basis for optimism may be the revenues of the state budget promulgated by the Finance Ministry following the results of the first quarter of this year: according to official data, they amounted to 3.591 billion against the forecast of 3.473 billion manat, which means overfulfilment of the forecast by 3.4%. In particular, the proceeds from the Ministry of Taxes amounted to more than 40% of the total funds, or 1.42 billion manat, through the State Customs Committee - 571 million manat (more than the forecast of 17.5%). It is for this reason that it is planned to increase the revenues of these structures responsible for replenishment of the national piggy bank (the Tax Ministries - by 135 million, the State Customs Committee - by 50 million manats) for a few more positions. It is also planned to attract additional funds in the amount of 76 million manat due to extra-budgetary incomes. The profit of the Central Bank of Azerbaijan will also be included in the state budget.

"The increase in the expenditure part of the budget is mainly due to the restructuring of the external debt obligations of the IBA," said Chairman of the Society for International Economic Studies Economics Fikrat Yusifov. "The main reason for increasing the expenditure item of the budget is the rehabilitation of the International Bank of Azerbaijan with the subsequent transfer of its external debt obligations to the state," the economist explained. - Thus, in this case, along with other circumstances, it is the rehabilitation of the International Bank of Azerbaijan that is the key factor that made it necessary to revise the country's main financial document. This is due to the fact that there are no funds for these purposes in the current budget, and the state will soon have to answer for the obligations of this financial structure."

He said that part of the foreign debt will have to be repaid before the end of this year, and for this reason it is required to revise the state budget, since the mentioned expenses are not provided for in it. Thus, according to our interlocutor, it was the rehabilitation of the International Bank that demanded an increase in the expenditure part of the "people"s purse", which was achieved by the resulting growth in the deficit. In addition, as already mentioned, the revised expenditure part implies spending in other directions. After all, as Finance Minister Samir Sharifov said yesterday, the budget will incur the burden in the form of additional payments to the Azerbaijan Deposit Insurance Fund (ADIF) and SOCAR.

Commenting on the issue of financing the deposit insurance fund, Yusifov noted that this is due to plans to increase the expenditure items of this structure. "Since the Deposit Insurance Fund reimburses insured deposits as a result of bank failures and additional funds are allocated to this structure, this means there are not enough funds available to finance the existing plans," the source said, adding that revenues will be provided at the expense of taxpayers, to the budget deficit at the expense of the source of coverage. This can be the means of the oil fund or some credit resources of international financial institutions.

"As far as I remember, there is no information on the materials, due to which the deficit will be covered," he said.

According to the current law "On the State Budget of Azerbaijan for 2017", the revenues of the country's main financial document were approved at $ 16.255 billion, and the expenditures - 16.9 billion manat with the oil price set at $ 40 per barrel for this year. -0-