Without economic freedom, living standards are unlikely to improve

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- Natig Bey, the President signed orders to raise the minimum wage in many areas. What do you think are the main reasons for the steps taken by the President? Does Azerbaijan have the strength to overpower these increases in the current state of the budget and economy?

- It is not a secret for anyone that salaries and pensions in Azerbaijan are very low. One of the main reasons for the decision to raise wages was the latest official information from the CIS Statistics Committee, released a few days ago. It clearly shows how far behind Azerbaijan is, being in the last place in Transcaucasia, both in terms of minimum and average wages, and in the matter of pensions and salaries of teachers and doctors. Both Georgia and Armenia overtook us. It was these official figures that became one of the main factors that triggered the government of Azerbaijan. The latest increase in wages and minimum wages will cause Azerbaijan to make significant progress on the issue of minimum and average wages in dollar terms, at least after September 1. It will even be the reason for Azerbaijan"s surpassing many countries, including Armenia. In making the decision this issue played an important role. As for whether it will be managed by the state budget or not and whether this step is appropriate in the current budget, then, of course, it is inappropriate. It is quite possible that in September it will be necessary to revise the budget again in order to make certain additions. Reducing costs at the end of the year will not be possible, since projects funded from the state budget have already been launched. It is possible that the budget will need additional funds. And the only source of additional funds is the Oil Fund. That is, there is no other source in Azerbaijan. There is a very primitive economic model in Azerbaijan. 91.2% of the country's exports are associated with oil, oil products and gas. Exports are tied to the energy sector. The real sector is developing very poorly, which is why the Oil Fund is the main source. The budget of 2019 directly by 50% is formed from the Oil Fund. The indirect role of oil in the formation of the budget is another 15-20 percent. 70 percent of the budget directly or indirectly depends on oil money and oil revenues. For this reason, this factor will play an important role in budgeting.

- From where can the funds be brought to the state budget to meet the growth? And can this growth increase inflation in the country? Can devaluation happen again?

- Here are two ways. Either they will be forced to take additional funds from the Oil Fund, at least about $ 2 billion, since approximately 7 billion had to be spent to fill this year"s budget. Either this figure should rise to 9 billion, or quite possibly, by the end of the summer and the beginning of September, we can be witnesses of another wave of devaluation. The manat may fall by about 15-20%, and this without withdrawing additional funds from the Oil Fund and transferring the envisaged USD to AZN will be equal to 20 percent of the additional difference, 2-2.5 billion AZN, which will be used to finance the growth of these funds.

That is, it is expected that such steps will be taken. Naturally, this is a factor that generates inflation, since the expectation of inflation is already formed. In Azerbaijan, there is a direct link between rising prices, higher wages and pensions. Salary increase is a major factor in price increases. If there is a devaluation of about 15-20%, then in Azerbaijan again, starting from autumn, we can become witnesses of two-digit inflation. After two devaluations in 2015, we witnessed two-digit inflation in 2015 and 2016 and we can see it again.

-Is there any international requirement in connection with the increase in wages and living standards?

- There is no special international requirement associated with this. That is, such requirements are not imposed on any country. Just the low place of Azerbaijan in international statistics and low purchasing power lead to the fact that the international community has begun to lose interest in Azerbaijan.

Low salaries and profitability is becoming a factor that reduces the attractiveness of the Azerbaijani market for international companies. The lower the purchasing power of the population, the lower the interest of companies in a given country. In this sense, that is, the latest increases, the macroeconomic indicators of Azerbaijan will improve, which will increase interest. Of course, an increase in wages, pensions and a total increase in the social sphere is a positive step. In fact, this is a factor that can to some extent affect the living conditions of the population. But it can be explained not with some international requirements, but from the point of view of international attractiveness.

- What needs to be done to ensure that the social welfare of the population of Azerbaijan and the standard of living is the same as in developed countries?

- In fact, it is wrong to compare Azerbaijan with developed countries, since both the standard of living is different and the level of profitability is different. For example, in the United States, people whose annual income is 20 thousand or less per year are considered to be poor. The state gives them social benefits. At the current rate 20 thousand dollars is approximately 34 thousand manat. If this amount is divided into months, it is about 3,000 manat per month. In Azerbaijan, those who receive such a salary are considered as representatives of the middle class. That is, there are various approaches - in Europe too. For example, in Germany, those who have a monthly salary of approximately below 1,500 euros and those who earn less than 900 euros, considered as a living wage, are considered to be poor. Persons in this category receive assistance from the state. If you count at the current rate, then 900 euros is 1,800 manat. In Azerbaijan, this is a salary, of which many people dream. It is inappropriate to compare Azerbaijan with the countries of Europe and the USA. Azerbaijan is better compared with the countries of the region. In this matter, we are at least two times behind Russia, although our economic and political systems are similar. In this issue we are lagging behind both Kazakhstan and Belarus, although the latter has no such energy resources. Improving the standard of living in Azerbaijan depends on production, value added and competitive environment. Azerbaijan lacks a competitive environment and a fair judicial system so that the economy can develop. A country cannot create added value. The country seems to live on the same pipeline. Azerbaijan is one of three oil-dependent countries in the world. From this point of view, the real sector should develop in Azerbaijan so that people can ensure that their GDP increases. At the current rate in Azerbaijan, annual GDP is 41 billion dollars. This is a very low figure for a country with a population of 10 million. Hungary, too, cannot be called a very developed country in Europe; it is a country with poor development, whose population is as much as ours. However, their GDP is about 200 billion dollars, 5 times more than in Azerbaijan. From this point of view, Azerbaijan still has a long way to go. It all comes down to economic freedoms and the rule of law; if this is not the case, the standard of living of the population is unlikely to improve.