To overcome the crisis, it is necessary to support the real economy

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- International rating agency Fitch Ratings has affirmed Azerbaijan's long-term issuer default rating (IDR) in foreign and local currency at 'BB +', and changed the outlook on the rating from 'stable' to 'negative'. What does it mean? What does the current rating promise for the economic and social life of Azerbaijan?

- First of all, it should be noted that Fitch gives a rating of liabilities, not the economy of Azerbaijan. With this rating, Fitch just shows that there are problems in Azerbaijan. In other words, a negative change in the rating means that if the current situation does not change in the near future, Azerbaijan's ability to fulfill its obligations will decrease. Because Fitch notes that Azerbaijan has two problems during this crisis. The first is the crisis caused by the coronavirus pandemic and the second is the price of oil on the world market. The first problem is a global problem. All countries can recover after the pandemic. The second issue does not depend on us. In fact, we are dependent on someone in this matter. As a result, while we can predict and determine the first one and get out of the situation, we can never predict the second one. Because this requires the recovery of the world economy. Accordingly, there will be a decrease in revenues. As a result of declining revenues, some liabilities are projected to increase. Therefore, our investment position may decrease.

- According to the agency's experts, GDP will decrease by 4.8% in 2020, while Fitch previously forecasted growth of 2.2% and the Azerbaijani government - 3%, which is not possible in the current situation. It turns out that the Azerbaijani government will not be able to achieve its goals for 2020? Based on the measures taken to prevent the sharp drop in oil prices on the world market and the spread of coronavirus COVID-19, the agency says there will be a decrease in economic activity in Azerbaijan in 2020. In other words, will Azerbaijan end this year with a deficit?

- The point is that Fitch wrote that in 2020 the Azerbaijani economy will shrink by 4.8 percent, and the IMF - 2.2 percent. Fitch simply took the maximum. It is clear that the economy will decline and this is mainly due to our dependence on oil. Because Fitch notes that 90 percent of our economy, two-thirds of government revenues, and most of GDP depend on oil. The Azerbaijani government will be able to fulfill its social obligations. There is no problem with that. The only problem is that we already see that the State Oil Fund will not be able to fulfill its revenue forecasts by the end of the year. In general, state budget revenues, i.e. consolidated budget revenues, will decrease. Funds will be spent to maintain the manat at the current level. At the same time, Fitch notes that it is unknown how the Azerbaijani government will solve this problem. Because the Azerbaijani government does not pursue a certain policy, so it is impossible to predict its steps. As a result, the economy will face certain problems. It is possible that the State Oil Fund will apply for its assets to fulfill its obligations. At the end of the year, along with the State Oil Fund, Azerbaijan's balance of payments will be in deficit. Because the surplus of our balance of payments occurs only at the expense of oil exports. Now the physical volume of oil exports and nominal incomes will decrease. As a result, the balance of payments will be in deficit. That is, the currency coming into the country will be less than the currency leaving the country.

- The agency touched upon the exchange rate of the manat and said that the government stubbornly keeps the exchange rate of the manat at ₼ 1.7. This is too expensive and unsustainable. Does this mean that the agency also believes that devaluation is inevitable?

- The Agency believes that if the exchange rate remains at the appropriate level, the revenues of the State Oil Fund will decrease in manat. They will even have to resort to their own assets. The agency also notes that since the beginning of this year they have already sold more currency than predicted. Even from official data, we know that the state budget has a surplus of ₼ 2.5 billion. Because the State Oil Fund has solved its plans ahead of time, and in this case, the decline in demand is due to other steps. That is, it has no direct economic basis. There are issues such as the coronavirus pandemic, the reduction of working hours of banks, the reduction of the manat in the population. As a result, this situation has arisen. Now, if economic processes are restored and oil prices remain low, then we may face problems again. And then going to devaluation will be somewhat better step than spending on foreign exchange reserves. In this case, either the Central Bank or the State Oil Fund will have to spend its reserves.

- What steps should the government take to avoid the trends that the agency warns of as a threat, as well as to get out of this situation? What can be done to help the Azerbaijani economy recover from the fall in world oil prices, as well as the crisis caused by COVID-19? Also, should external shocks expose the Azerbaijani economy to as little risk as possible?

- Appropriate steps should have been taken in 2015. But they were not taken then. There were some attempts in 2015-2016. But in reality, these steps were not visible. In the current case, there must be support for the real economy. The government has approved a credit policy of ₼ 1.5 billion. It is still unknown how and by what mechanisms this credit policy will be implemented. On the other hand, there are problems in many areas of the economy. But those areas will not receive certain support. Although they do not work too in the current crisis. There are such moments. As a result, the economy is facing serious problems. In this case, the government can use its resources to the maximum to overcome the storm. That is, for example, it can expand credit policy. It even announced that the approved loans will be repaid at 15 percent. This is a very high percentage. In my opinion, the interest rate on this loan should be reduced. Although it says that half of it will be subsidized by the state, the double calculation is not necessary. If cheap loans were provided in advance, there would be a certain incentive for development in society. It is true that the inefficient use of these funds is possible. It would be better to provide addressed or targeted loans. At the same time, transparency must be ensured in every system, in every step taken by the government. This has not been observed yet. At the same time, the government must ensure maximum participation in its orders and public procurement. In other words, transparency should be increased in investment expenditures of ₼ 4 million. In addition to maximum transparency, there must be maximum participation so that economic sectors can emerge from the crisis and recover. In the next period, the country will have to take a number of steps, given that the country will be deprived of many incomes (losses in the catering and hotel sectors) during the post-pandemic period. Raising this sector should give an impetus to the development of domestic tourism, given that 150-200 thousand people work in this sector. It is necessary to think of a comprehensive policy, such as the stimulation of the relevant transport system, the stimulation of tourism companies, the provision of appropriate benefits. At the same time, this comprehensive policy should provide targeted assistance to certain areas, and also in such a way that no area that is strategically important for Azerbaijan is left out. In many cases, the financial industry, which is close to the oil industry, the financial sector, and the insurance sector, is more supported but other sectors of the real economy remain unsupported. This must be prevented. For this, of course, a comprehensive policy must be pursued. And this is what the country's investment policy should be about. Steps should be taken, such as merging the investment sector with the economic sector, not with the construction of any buildings or the repeated repair of the same roads, the construction of additional roads that do not have economic significance. And it should be presented to society as a single complex policy.