Statement by the IMF Staff Representative December 19, 2003

Macroeconomic performance continues to be strong, with double-digit real gross domestic product growth and low inflation. All quantitative and structural performance criteria have been met. Significant progress has been made in converting quasi-fiscal subsidies to fiscal subsidies. The government acknowledges the importance of developing a long-term oil revenue management strategy. The government will continue comprehensive structural reforms, including adoption of an automatic price adjustment mechanism for domestically sold oil and gas product prices, and adoption of the banking system and central bank laws.

Abstract

Macroeconomic performance continues to be strong, with double-digit real gross domestic product growth and low inflation. All quantitative and structural performance criteria have been met. Significant progress has been made in converting quasi-fiscal subsidies to fiscal subsidies. The government acknowledges the importance of developing a long-term oil revenue management strategy. The government will continue comprehensive structural reforms, including adoption of an automatic price adjustment mechanism for domestically sold oil and gas product prices, and adoption of the banking system and central bank laws.

December 19,2003

1. This statement provides information that has become available since the staff report was circulated. It docs not alter the thrust of the staff appraisal.

2. The Azerbaijan Parliament approved the consolidated 2004 budget on November 28, 2003. The approved budget is identical to the draft budget described in the staff report, with two minor exceptions. First, the budget targets an overall fiscal deficit that is about 0.1 percent of GDP lower than in the staff report. This is due to a higher VAT revenue forecast of manat 45 billion, as a result of VAT payments on expenses related to construction of housing for refugees; the staff fully concurs with this revision. Second, 5 billion manat (less than 0.1 percent of total expenditures) has been switched from capital to current expenditures.

Azerbaijan Republic: Third Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility—Staff Report; Staff Statement; Press Release on the Executive Board Discussion; and Statement by the Executive Director for the Azerbaijan Republic
Author: International Monetary Fund