Dilemma: Survival or Death? How Can a Pensioner Live on 285 Manats?

Next year, the minimum wage in Azerbaijan will be set at 400 manats, according to the feedback provided by the Accounting Chamber on the draft law on the "State Budget of the Republic of Azerbaijan for 2025." In 2024, the minimum wage was 345 manats.

Additionally, the minimum pension amount for 2025 is projected to rise from 270 manats to 280 manats. The forecast also suggests that the ratio of the minimum pension to the minimum wage (400 manats) will be 70%. Furthermore, the subsistence level and the need criterion will be increased from 270 to 285 manats.

But do these figures correspond to real market prices, inflation and normal living conditions? - ASTNA asked the financial expert Akram Hasanov.

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Question: Mr. Akram, according to the Accounting Chamber’s feedback on the draft law on the "State Budget of the Republic of Azerbaijan for 2025," the minimum wage is set at 400 manats, the minimum pension at 280 manats, and the subsistence level at 285 manats. Do you think these figures reflect real market conditions?

Answer: The minimum wage in Azerbaijan not only fails to meet real needs but also does not align with the country's international commitments. Azerbaijan has been a party to the "International Covenant on Economic, Social and Cultural Rights" since 1992. Article 7 of this covenant states that everyone should receive fair remuneration sufficient for a decent living.

Since 2004, we’ve also been part of the European Social Charter, which, in Article 4, obliges states to ensure workers receive wages that provide a decent standard of living for themselves and their families. According to the European Committee of Social Rights, a wage that ensures a decent living should be at least 60% of the national average wage. Currently, the average monthly wage in Azerbaijan is 993 manats, meaning a fair minimum wage should be at least 595.8 manats. However, ours is only 345 manats—400 manats next year would still fall short.

When we apply the same logic to pensions, the situation is even more dire. How can someone survive on 285 manats? This amount is clearly insufficient for a normal life.

Question: Specifically regarding pensions, what percentage of a pensioner’s monthly needs does this amount cover?

Answer: A pensioner is typically elderly and likely dealing with health issues. Even a healthy person would fall ill living on 285 manats, as many of our citizens already do. This pension is essentially a message to retirees: “Hurry up and die.” It reminds me of the opening scene of the film Dede Gorgud, where two young men dig a grave for the elder, saying, "Your grave is ready, come in."

Question: Why does the government treat pensioners this way? For over 20 years, there have been new decisions annually about pension age, thresholds, and requirements. What is the purpose of these changes?

Answer: There are two aspects here: general and specific. Generally, there’s stark social polarization in Azerbaijan. Despite this, the tax burden on the wealthy is no different from that on the poor. Taxing the wealthy and their assets more heavily could fund higher pensions for the poor. However, officials avoid this because it would increase the tax burden on themselves and their affiliates.

Specifically, pension amounts are unfairly distributed. Some officials receive pensions of several thousand manats, while ordinary citizens, even lifelong workers, receive mere pennies. Serious reforms are necessary.

Question: The number of pensioners in Azerbaijan is rapidly declining. Experts estimate that at least 200,000 people aged 64 and above do not qualify for pensions due to changes in requirements. How much have these changes contributed to the decline?

Answer: Raising the retirement age has played a major role. Additionally, many fraudulent pensions have been eliminated, further reducing the number of pensioners.

Question: Isn’t the retirement age in Azerbaijan too high? According to the latest UN Economic Commission for Europe report, Azerbaijan ranks 36th out of 47 countries for life expectancy at age 65. Doesn’t this suggest the retirement age is excessive?

Answer: Globally, raising the retirement age is a trend due to increased life expectancy and insufficient pension funds. I don’t see an issue with 65—it’s higher in some countries. The main concern should be ensuring that pension amounts are sufficient.

Question: Despite plans in the 2001, 2014, and 2009 reforms to create private and voluntary pension funds, none of these initiatives have materialized in the last 20 years. Why?

Answer: In Azerbaijan, state programs are often written for the sake of writing, with over 90% of their content going unimplemented. Even many presidential decrees remain unenforced because they lack genuine intent. In this case, private sectors are allowed only when monopolies are intended. Since there’s no such intent yet, private pension funds remain unestablished.

Question: Why are there no independent pension funds in practice, despite being legally allowed?

Answer: Private pension funds will likely never materialize. At most, a single monopolistic fund might emerge. Once officials are ready to implement this, they’ll quickly legislate and establish such a fund. But do we really need it? If not, the state should continue managing this sector.

Question: How should pension reform be carried out to make it accessible and meet retirees' needs?

Answer: Fully meeting needs is unrealistic. Azerbaijan is on the brink of a long-term economic crisis as the era of easy oil money ends. However, taxing the wealthy more heavily could at least make pensions fairer, even if not fully sufficient.