Natig Jafarli: without reforms there will be chaos in Azerbaijan

 There was no need in the new sharp devaluation, because the national economy has not yet had time to "digest" the 35% devaluation in February, so the current sharp devaluation would have  hard consequences, said Natig Jafarli,  an economist and the executive secretary of the REAL Movement,in an interview with Turan and the radio station "Voice of America".

The only positive step of  the government will be that in 2016  it was supposed to  carry out transfers to the  satte budget from the Oil Fund  by $6 billion, but now the amount will be by  40% less, and the Oil Fund will save $2 billion.  The rate of decline in foreign exchange reserves of the CBA willalso low.  However, due to the decrease in economic activity, tax revenues of the state budget will decrease.

The devaluation will affect prices, and although the government has stated that 55% of the food is local produce, in reality, the situation is different. The raw material for many products are imported. For example, tea and milk products; 90% of tea is imported from abroad. Powdered milk is also imported from abroad, and dairy products are made from it.

Therefore,  iot will be impossible to keep prices by administrative methods. According to Jafarli,  serious inflation is expected and prices will rise by 25-30%. Commenting on the statement of the CBA's "floating rate" Jafarli said that there are not conditions for the establishment of a floating exchange rate. "We have no stock market and currency exchange." In fact, each morning the  CBAdefgines the rate  by  administrative means. With regard to the salary of the population, there is a small layer of people working in foreign companies or abroad,  and receiving salaries in foreign currency. They certainly will win. However, the vast majority will lose. Salaries, pensions and benefits, at best, will be indexed at official; inflation  rate (4%).

 Under  favorable scenario  state employees will receive a 4% surcharge on the background of a rise in price of food and non-food products by 30%. All of these can cause social tensions. After the first devaluation were closed 30.000 jobs. After the second  the process will be more ambitious.

First of all, it will affect the banking sector. Of  eleven thousand people employed in this sector, half can

be reduced.

 Twomillion and  400 thousand people have bank loans - almost a third of the adult population. One-third of loansis  in dollars, and their paying off will be  difficult.  For January 1, 2015 in Azerbaijan there were about 900 million AZN bad loans, and  by November 1, this figure had risen to 1.6 billion AZN. The following year, the volume of bad loans will exceed 2 billion manats.  In the future, the expenditure budget will be reduced by 4.2 billion manat, of which 3.8 billion AZN is investment spending.

  Rising unemployment, reduced income will contribute to the growth of social tension.

Jafarli considers necessary to carry out political and economic reforms, ensuring the independence of the courts to summon the confidence of investors. It is important to reform customs, to eliminate monopolies, so that people can freely import and export products. Tx reforms and streamlining the fiscal system is necessary.

"Without fundamental economic and political reforms  there will be  serious socio-economic problems. This will lead to a political crisis and chaos. The only way to avoid it  is reform," said Jafarli. -03-