Azerbaijan Republic
Poverty Reduction Strategy Paper Progress Report
Author: International Monetary Fund
Publication Date:
15 Oct 2004
eISBN:
9781451802603
Language:
English
Keywords:
ISCR; CR; absolute poverty; infant mortality; financial support; medical treatment; community development; fiscal policy; State budget; per capita income; State expenditure
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This paper examines the progress report on Azerbaijan Republic’s Poverty Reduction Strategy Paper. The share of the production and non-oil sector in GDP has increased. The shares of industry, construction, wholesale, and retail and service sectors increased, while the shares of agriculture transport and communication, hotel, restaurant, social and informal service sectors and net taxes from goods and imports decreased. Agricultural reforms lead to a real growth rate of 6.4 percent in 2002 and 5.6 percent in 2003. The share of crop production in agricultural production has been 60 percent and of livestock production 40 percent in the reported period.

Abstract

This paper examines the progress report on Azerbaijan Republic’s Poverty Reduction Strategy Paper. The share of the production and non-oil sector in GDP has increased. The shares of industry, construction, wholesale, and retail and service sectors increased, while the shares of agriculture transport and communication, hotel, restaurant, social and informal service sectors and net taxes from goods and imports decreased. Agricultural reforms lead to a real growth rate of 6.4 percent in 2002 and 5.6 percent in 2003. The share of crop production in agricultural production has been 60 percent and of livestock production 40 percent in the reported period.

Introduction

SPPRED: the global context

Since the end of the 1990s, there has been reconsideration by the international community of the best ways to promote economic growth and reduce poverty in the world. This has resulted in efforts by national governments, in close collaboration with international organisations, to produce nationally strategies for poverty reduction (Poverty Reduction Strategy Paper PRSP). Such strategies also provide a focal point for ensuring better coordination of external (donor) assistance aimed at poverty reduction. In the years 2001-2003, Azerbaijan, with support from its international partners, produced such a national strategy document: the SPPRED.

The new global approach to poverty reduction has gone hand in hand with a broader understanding of poverty. While there are different estimates of the number of poor in the world, (and in individual countries), there is a common recognition that poverty is “multi-dimensional” and that a “mix” of parallel policy actions are required to tackle the different dimensions. Whereas previously the focus was almost entirely on “income poverty” (low levels of per capita income or expenditure levels), it is now accepted that coordinated efforts need to be directed at all dimensions of poverty in order to have a long term and sustainable effect on living standards. Using an income poverty type of measurement, the World Bank (WB) has estimated that 2.8 billion people live on less than $2 per day, and 1.2 billion on less than $1 per day1.

The dimensions of poverty can be summarized as:

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The SPPRED represents an attempt to take into account all of these dimensions of poverty and to understand the links between them.

The global commitment to reduce poverty has been expressed in the clear poverty focus of international organizations since the late 1990s. While different organisations may call the strategies different names, or may have a slightly different focus, the end aim for all is poverty reduction and economic development and the strategies are fundamentally statements of national governments’ commitment to poverty reduction. However, they need not be a series of different strategies for different donor organizations. In Azerbaijan, SPPRED has provided a successful example of full collaboration and coordination between the government and the various donor organisations (international and bilateral) in the formulation and implementation of one national strategy.

SPPRED: Past and Present

As mentioned above, SPPRED was formulated in the period 2001-2002. In 2001, a Secretariat was set up at the Ministry of Economic Development (MED) with the task of leading and coordinating work on the strategy document. 15 Sector Working Groups (SWGs) were also set up, including members from government agencies, Non government organizations and civil society. Drafts of the policy proposals being put forward in the strategy document were discussed at various national and regional seminars. The final draft was presented at an international conference held in Baku on 25th of October 2002, and received final approval with a Presidential Decree on February 20th, 2003.

The SPPRED document was submitted to the International Monetary Fund (IMF) and WB. In April 2003, the staff of the International Development Agency (IDA) and IMF produced a Joint Staff Assessment (JSA) of the strategy document. The JSA gives a positive review of SPPRED, evaluating it as a significant achievement, and stating that it “represents a credible poverty reduction strategy that provides a sound basis for Bank and Fund concessional assistance”.

In May 2003, a resolution of the Cabinet of Ministers (CM) decreed that work should begin on the implementation of the strategy, and that the MED is to coordinate activities to ensure successful implementation of the strategy.

Since then, the SPPRED Secretariat under the MEDhas been re-formed and extended to include a Poverty Monitoring Unit (PMU). Its activities were supported in 2003 through assistance from the WB, Asian Development Bank (ADB), United Nations Development Programme (UNDP), US Agency for International Development (USAID) and GTZ.

SPPRED: Brief summary of its content goals

The aim of this report is to summarise progress achieved during the first year of implementation: to highlight problems encountered, and outline future activities. Before going on to describe the structure of the report, it is worth summarising the main points of the SPPRED document.

SPPRED as a strategy document set out to answer four key questions:

  • 1. Where are we now? The first chapters of SPPRED set out what we know about poverty and its determinants in the country and what factors are holding back future economic development in the country.

  • 2. Where do we want to go? The vision of the strategy is further economic development which can guarantee a fairer distribution of the benefits of economic growth: broad development which is not only concentrated in the oil sector and which is spread evenly over the different regions of the country.

  • 3. How do we want to get there? SPPRED identified six key strategic directions for achieving its overall aims of poverty reduction and economic development, namely:

    • 1. Creating an enabling environment for the growth of income-generating opportunities

    • 2. Maintenance of economic stability

    • 3. Improvement of the quality of and equity of access to basic health and education services

    • 4. Improvement of infrastructure

    • 5. Reform of the existing system of social protection

    • 6. Improvement of the living conditions and opportunities of the refugee and IDP population

  • 4. How will we know that we are getting there? SPPRED includes a policy matrix which summarises the policy direction and measures considered necessary to achieve the above strategic aims. It includes the policy priorities identified by the 15 SWGs, and categorises them into four main functional groups:

    • 1. Economic development and employment growth

    • 2. Social policy and human development

    • 3. Regional policy and infrastructure development

    • 4. Institutional reform and capacity building

The policy matrix includes a list of indicators to be used for monitoring implementation progress.

SPPRED: Implementation

SPPRED is a strategy document for the period 2003-2005. This annual report summarises activities and progress in the year 2003. Since this is the first year of the programme, there has not been time to organise impact analyses of the policy measures being implemented under any of the four categories mentioned above. Neither has enough time passed for the full implementation effect of most measures to become apparent, making impact analyses in any case premature.

As stated above, the SPPRED Secretariat was re-formed under the MEDin May 2003, and has since been coordinating the monitoring of the implementation process. Line ministries are responsible on implementation of the policy actions within Policy Matrix of the SPPRED and to provide a quarterly report on the implementation status to t he Secretariat.

The report is divided into seven chapters reporting on the key areas outlined in the SPPRED document:

Chapter 1 describes the relationship between the global Millennium Development Goals (MDGs) and SPPRED goals. The MDG country-specific goals, targets, and indicators, are the subject of on-going discussions. It is anticipated that once they have been approved, they are unlikely to differ greatly from the goals and objectives of the SPPRED.

Chapter 2 provides an update by the PMU within SPPRED Secretariat on the main economic development and living standards indicators. It also points out the links between these and the country-specific indicators being discussed for monitoring progress towards achieving the MDGs.

Chapter 3 provides an update on progress in the implementation of a range of measures relating to fiscal policy, monetary policy and development of the banking sector, investment policy, energy policy, and labour market and employment policies. The information is based on the implementation progress reports received from the line ministries in these sectors.

Chapter 4 reports on those sectors relating to social policy and human capital development. Progress in the implementation of policy measures and activities in education, culture, health, social protection, and improving the living standards of IDPs and refugees is set out in this chapter.

Chapter 5 is devoted to regional policy and infrastructure development. This chapter gives a summary of the activities related to public investment in utilities and infrastructure; a report on measures relating to agriculture, irrigation, land protection and water resources, and also those relating to environmental protection and the development of tourism.

Chapter 6 summarises the policy measures being implemented to promote institutional reform and capacity development, both of which are crucial to support the measures undertaken for economic and social development reported in the previous three chapters. This chapter reports on judicial and legal reforms, progress in decentralisation and developing capacity in the municipalities, as well as capacity building in poverty monitoring.

Chapter 7: Participation. The approach adopted is an inclusive approach and the Secretariat is facilitating extensive and inclusive consultation and participation in the implementation and evaluation of policy measures. The development of a participatory process in the implementation phase has received a lot of attention from the Secretariat, donor organisations, NGO’s and the working groups. A full report of this year’s activities and recommendations for further strengthening of participation of vulnerable and excluded groups are contained in this chapter. The adoption of an inclusive approach is viewed as integral and fundamental in SPPRED implementation activities.

The report also contains 3 appendices, namely a table summarising discussion so far on country-specific MDGs, a report on the status of the country’s MTEF, and a summary table containing selected economic and social indicators for 1999-2003.

Chapter 1: SPPRED and the MDGs

In September 2000, 147 heads of state and government, including the President of Azerbaijan, Heydar Aliyev, committed themselves to the Millennium Development Goals (MDGs) to achieve poverty reduction and promote human development in the world. The number of countries giving their commitment has since risen to 191. MDGs were set out in the Millennium Declaration adopted by the United Nations General Assembly. They identify a set of goals, which provide a focus for the efforts of the world community to achieve measurable improvements in people’s lives by the year 2015. The full MDG framework comprises 8 goals, 18 targets and 48 indicators. Most targets are to be achieved over a 25-year period, from 1990 to 2015. The 8 main goals are as follows:

  • Eradicate extreme poverty and hunger

  • Achieve universal primary education

  • Promote gender equality and empower women

  • Reduce child mortality

  • Improve maternal health

  • Combat HIV/AIDS, malaria and other diseases

  • Ensure environmental sustainability

  • Develop a global partnership for development

These MDGs (as well as the 18 targets) are set at the global level, and cannot be considered appropriate for all countries. Azerbaijan, like the other nations who signed the Millennium Declaration, now has the task of adapting them to its concrete conditions and stage of development and of setting country-specific goals and targets. Initial discussion of possible country-specific goals has taken place in 2003 within the framework of the SPPRED’s activities. The reasons for this are as follows:

The overall aim of the MDGs and that of SPPRED is poverty reduction, and the overall goals identified by SPPRED are fully compatible with the MDGs. Moreover, SPPRED sets out a series of priority policy directions and measures which can be used by the government to achieve these goals.

SPPRED as a strategy is “nationally owned”, i.e. it is a poverty reduction strategy developed not by any individual donor organisation, but by the government, through a participatory process involving civil society as well as t he International Financial Institutions (IFIs) and donor community. In the same way, it is considered important that the country-specific MDGs and targets should be nationally owned, and that they could therefore benefit from being “embedded” in the SPPRED participatory process.

SPPRED was developed as a poverty reduction strategy which could satisfy the requirements of a PRSP. While there are general guidelines on the content and approach required for a PRSP, it is recognised that there is no single recipe for each country, and that each PRSP will have to take into account the specific economic conditions, problems, institutions, social capital etc of the specific country. Azerbaijan has already gone through a major part of the process of adapting the PRSP guidelines to its specific conditions. In the same way, the global MDGs have to be adapted to local conditions, and made “country-specific”. But this process could be accelerated by building on the groundwork done in the SPPRED formulation phase.

One of the principles of SPPRED is that it is not an abstract “wish list” of good intentions, but is linked to the actual expenditure capabilities and potential of the country. For this reason, the strategy includes a Medium-Term Expenditure Framework (MTEF). This is also one of the principles of the MDGs; i.e country-specific goals and targets should be backed up by a clear expenditure programme, which makes their achievement realistic.

The WB and the UNDP have recently issued a joint statement, which sets out the desire of both organisations to see PRSPs and country-specific MDGs being integrated, since PRSPs are seen as ideal vehicles through which to mobilise the country’s resources to achieve the MDGs. The ADB, which since 1999 has made poverty reduction its overarching aim, supports the development of national poverty reduction strategies and in Azerbaijan has provided support to the Government in the formulation and implementation of SPPRED. In 2002 the ADB also adopted the MDGs as the principle targets for poverty reduction. Thus SPPRED has so far provided an excellent example of donor coordination between IFIs and also other members of the donor community. The UN organisations have also been actively supporting the SPPRED process, and by combining the formulation and implementation of country-specific MDGs with the ongoing SPPRED activities and discussions, the excellent coordination and focussed efforts seen so far could be further enhanced.

SPPRED is a programme which sets out policy goals and priorities for the period 2003-2005. The MDGs, on the other hand, set goals and targets for the period up to 2015. The discussion of the formulation period as well as the first experiences of implementation could be taken as a basis for developing longer term goals and targets for poverty reduction, and for country specific MDGs.

During the period reported here (2003), preliminary discussions have been underway within the SPPRED Secretariat and line ministries on the most appropriate MDGs for Azerbaijan. There has also been discussion of these at the Regional Workshops held throughout the country (see Chapter 7 for details). The table in Appendix 1 gives a summary of the country discussion so far, and some conclusions are reported in the relevant chapters in this report. Here we highlight just several key points:

SPPRED has so far identified its overall goals for poverty reduction and the next stage is to set concrete targets and indicators for these goals. In the formulation period, it was found that for most goals, the statistical basis for setting benchmarks and monitoring progress in achieving targets is still weak; and more time was needed for discussion of targets. However, setting concrete targets and indicators is a task which the Secretariat is currently working on, parallel to its work in building up the statistical base and capacity in the country. The concrete targets for both SPPRED and the country-specific MDGs will be developed together through dialogue with the relevant stakeholders, SWGs and local experts in the coming period.

One clear conclusion is that 1990 cannot be taken as a baseline for most country specific targets, partly due to lack of data, and sometimes due to the fact that it is considered inappropriate because it precedes a lot of the social collapse associated with the first years of the transition period. Thus use of 1990 would lead to an underestimation of the achievements of the country in overcoming the difficulties and drop in value of most social indicators in the 1990s, and in some cases 1995 is considered more appropriate (see Appendix 1).

In the case of poverty figures, the baseline will have to be 2002, due to the lack of comparable data before this date (see Chapter 2 for more details). Only from 2002 onwards will there be data collected on an annual basis in a consistent way, i.e. using the same survey methodology and allowing the same definitions of key welfare indicators. A new absolute poverty line has been prepared by the relevant SWG and this will be used to set the 2002 baseline.

It is expedient that the second global MDG of achieving universal primary education be replaced by the country-specific goal of achieving universal secondary education. Within this it is recognized that this only makes sense as a country goal if it is accompanied by the measures envisaged in SPPRED to improve the quality of and access to basic school education, and to ensure that curriculum reflects both the changing skill requirements of the new labor market and training in basic life skills. For monitoring purposes, it will be necessary to look not only at enrolment rates, but also actual attendance rates.

While goal three (promoting gender equality and empowering women) is considered important for Azerbaijan, the targets and indicators require further discussion. There will be less emphasis on literacy and quality of opportunity at the lower levels of education, but more on encouraging women to take on higher education that could create an opportunity for them to aim for top positions in economic and political life.

While goals four and five (reducing child and maternal mortality) are considered appropriate for Azerbaijan, the main problem encountered is the discrepancy between official data (based on administrative sources) and survey estimates for these indicators. With regard to Goal 6 (combating HIV/AIDS, malaria and other diseases), the goal is also considered appropriate, and discussion is taking place on the targets and indicators.

Goal seven (ensure environmental sustainability) is considered very relevant to Azerbaijan and is an integral part of SPPRED. However, initial discussion of targets and indicators has shown that targets regarding land areas covered by forest or guaranteed protection to maintain biological diversity will have to be set in a sensitive manner, and involving local communities in the discussion. This is partly due to the need to ensure that the poor are not deprived of access to land and energy supply (firewood) in situations where supply of alternative energy sources cannot be guaranteed at affordable prices.

Setting a target for access to safe drinking water is considered appropriate for Azerbaijan, but this will require an improvement of the monitoring system, and also more work on clarifying the definition of “improved water source” to be used in the country. At present administrative statistics are available only on access to piped water, but there is no consistent monitoring of the quality of the water which is delivered through the pipes. For Azerbaijan it may be appropriate to set a target for increasing access to piped water in rural areas, and also to set indicators which rely on monitoring of the quality of the water being delivered to households. The latter will require improvements in the current monitoring system (as envisaged by SPPRED; see policy measure under health).

The global MDGs include a target aimed at improving the lives of slum dwellers. This concept is considered difficult to define and monitor in Azerbaijan. However, it may be appropriate for Azerbaijan to set a target, possibly for 2010 rather than 2015, aimed at ensuring that all IDPs are re-settled from accommodation with access to sanitation.

The final MDG (developing a global partnership for development) requires more country discussion, but a first proposal has been put forward to adapt this for Azerbaijan to a country-specific goal of “increasing FDI in the non-oil sector”. This is completely compatible with SPPRED’s key strategic aims of creating an enabling environment for income-generating opportunities, and of promoting economic development outside the oil sector and outside of the Absheron peninsula.

The country discussion of MDGs will continue in 2004, and targets will be developed as SPPRED also goes on to develop specific targets. In line with the recommendations made in the Joint Statement by the WB and UN on the relationship between MDGs and PRSPs (April 2003), this report should be considered as both an annual SPPRED report and the country MDG report.

Chapter 2: Poverty Monitoring

Introduction

One of the tasks of the SPPRED Secretariat is to coordinate work on monitoring trends in living standards in the country, using a variety of living standards indicators. In 2003, PMU was set up within the Secretariat to carry out this work. This chapter summarises the results of the work carried out by the PMU in 2003.

The chapter is structured as follows. Section 2.1 provides an update on the main indicators for monitoring economic development, while section 2.2 provides an update on the poverty estimates for the country, using the 2002 Household Budget Survey (HBS) data. Section 2.3 looks at available data on employment and unemployment. Section 2.4 summarises trends in education indicators, and section 2.5 looks at health indicators (including those relating to maternal and child welfare). Section 2.6 provides an overview of environment-related indicators, and section 2.7 looks at data relating to the living standards of IDPs and Refugees. Finally, section 2.8 summarises available data on social protection benefits and uses HBS data to do a preliminary analysis of the targeting efficiency of some of the benefits.

Due to time constraints, it was not possible this year to add a separate section on gender and MDG number 3 (“promote gender equality and empower women”). However, as far as possible, the data set out in the various sections below have been disaggregated by gender, and this year more work will be carried out on developing more detailed analytical papers on gender aspects of poverty.

2.1. Economic Development

Within SPPRED, the main tasks of economic policy are to: (i) maintain macro-economic stability (ii) build up local capacity in order to provide sound management of the large-scale oil revenues expected over the coming years; (iii) take forward the structural reforms already initiated and promote development of the non-oil sector; (iv) stimulate the development of entrepreneurship, investment and market infrastructure in the regions; (vi) and ensure Azerbaijan’s integration into the world economic system and encourage FDI. While success in the first two tasks are seen as a precondition for the implementation of all the poverty reduction measures envisaged in SPPRED; the last two are particularly relevant to the key strategic aim of creating an enabling environment to encourage employment creation and income generation. The economic indicators available for 2002-2003 are examined below in the context of these tasks.

1. Maintain macroeconomic stability

Gross domestic Product (GDP) growth increased by 11.2% in real terms (from 30,312.3 bln. AZM in 2002 to 35,053.4 bln. AZM in 2003). This is the highest rate of GDP growth since 1996, the year in which positive growth rates were first registered. Per capita GDP growth was 10.2% in 2002 and 10.3% in 2003, reaching 4.3 mln. AZM (879.7 USD) in 2003. The deflator index was 104.0% in 2003 (100.7% in 2002). The statistical data thus confirm that overall macroeconomic stability has been maintained for the period under review.

2. Sound management of the economy

There was a considerable increase in both budget revenues and in expenditure in 2002-2003. Thus, in 2002 revenues of the State Budget increased by 16% to 4,551 bln. AZM compared to 2001 (3,924 bln. AZM), and by 34.7% to 6,131.9 bln AZM in 2003. Expenditure increased by 13.1% to 4,567 bln. AZM in 2002, and by 32.5% (to 6,173 bln. AZM) in 2003.

The budget deficit decreased to 107.6 bln. AZM in 2002 (from 113.5 bln. AZM) and to 41.1 bln. AZM in 2003 (0.4% and 0.1% of GDP respectively). Both revenues and expenditure were in line with forecasts.

Expenditure is gradually being brought in line with SPPRED priorities. 17.3% was spent on social protection, 19% on education, 4.5% on health, and 19.4% on capital investments. The share of expenditure for wages, pensions and benefits to the population paid increased considerably (by 16.2%) and accounted for 2301 bln. AZM in 2002 and 2,676.3 bln. AZM in 2003.

The rate of inflation and exchange rate of the national currency were maintained at an acceptable level, and money supply to the economy improved. The average annual inflation rate was 2.2% in Azerbaijan in 2003 which is 0.6% lower than in 2002. The average annual exchange rate of the national currency (AZM) to USD was 4,860.8 AZM in 2002 and 4,910.8 AZM in 2003.

Interventions by the National Bank (NB) in the currency market were purchase-oriented (USD 122.4 mln.) in the reported period and made up 3.5% of the total turnover. This purchase-oriented intervention helped to improve money supply to the economy and to prevent revaluation and symptoms of the “Dutch disease”.

National currency reserves increased by 23.7% in 2003 and were 2,316 bln. AZM as of January 1, 2004. The money multiplier increased by 3.7%. Measures undertaken to reform the banking system, to develop banking infrastructure and especially, to improve the payment system, had a positive influence on this figure. In 2003, money mass in AZM (M-2) broadly increased by 28% and amounted to 2,592.2 bln. AZM. Since this process took place in a condition of low inflation, the real growth rate of M2 was higher - 25.2%.

The share of cash in the money mass decreased by 3.7% in this period. The cash money mass increased 22.3%, while non-cash money mass increased 54.4%. At the same time the level of dollarization also decreased. Thus, the share of foreign currency savings and deposits in total savings decreased by 2.3%.

The volume of savings and deposits increased by 35.3%. The volume of the savings by individuals increased by 64.2% to 1259.7 bln. AZM (compared to an increase of 31% in 2002). The share of private banks’ savings in total savings was 41.5% in 2003. More importantly, while short-term savings of individuals increased 11.0%, long-term savings increased by 3.2 times, showing increasing confidence in the banking system. The structure of savings and deposits also suggests increasing confidence in the national currency - manat. Thus, while savings and deposits in foreign currency increased by 31.7%, savings and deposits in national currency increased by 54.4%. The average interest rates for manat deposits decreased from 8.3% at the beginning of 2003 to 6.5% at the end of 2003.

In 2003, improvements in money supply to the economy and a decrease in the interest rates for deposits also had an impact on dynamics of the interest rates for credits. Thus, average interest rates for credit in the national currency decreased from 15.6% at the beginning of 2003 to 14.9% at the end of 2003.

The NB reduced its discount rate from 10% to 7% since September, 2002, and in 2003 the rate remained unchanged. Compulsory reserve norms for short-term deposits were 10% and for long-term deposits it was set at zero. Analysis shows that following the reduction of the compulsory reserve norms to zero, the long-term deposits began to increase. Thus, while short-term deposits increased 11.0%, long-term deposits increased 3.2 times.

Capital investments increased by 71.2% to 17.8 trillion AZM. At the end of 2003 the country’s monetary reserves had increased by 14.4% in comparison with the previous year, from USD 1,374 mln. to USD 1,572 mln.

A rational foreign borrowing policy was continued in 2002-2003. The amount of the external debt paid off was USD 1,358 mln. (22.3% of GDP) as of January 1, 2003, and 1,508.1 mln. USD (21.2% of GDP) by November 17, 2003. The amount of external debt per capita was USD 182.5 (as of January 1, 2003 it was USD 166) as of 17 November, 2003. This is considerably lower than in other transition countries.

Due to large scale investment programmes, it is expected that oil and gas production in the country will further increase in the near future, and that the export of oil, oil products and gas will increase significantly. This can be expected to lead to a large inflow of foreign currency to the country, what will in turn drive up growth rates (which have averaged 10% in recent years).

However, growth rates based on the rapid exploitation of natural mineral resources such as oil and gas will have only a limited direct impact on poverty reduction and in fact complicate the management of the economy. Increases in the real exchange rate of the national currency could still lead to the “Dutch disease” in the mid-term, i.e the “forcing out” non-oil sector by oil sector. Efforts to avoid this and maintain sound management of the economy will therefore have to be further strengthened.

3. Structural Reform and Non-Oil Sector Development

The share of the production and non-oil sector in GDP increased. Thus, while the share of production (including construction) was 57.3% and share of service sectors and net taxes from goods and imports, was 42.7% in GDP in 2001, these figures were 59.9% and 40.1% in 2002 and 63% and 37% in 2003 respectively. The share of the non-oil sector in GDP increased from 68% in 2001 to 70.4% in 2002 and to 71% in 2003.

There were positive changes in the sectoral breakdown of GDP in 2002-2003. The shares of industry, construction, wholesale and retail and service sectors increased, while the shares of agriculture, transport and communication, hotel, restaurant, social and informal service sectors and net taxes from goods and imports decreased.

The following information on differencies between the shares of sectors in GDP for 2002 and 2003 visually reflects changes in the sectoral breakdown of GDP: industry -37.8% (34.9%); construction -12.1% (10.8%); wholesale and retail, service sectors on repairing household and private stuff -7.9% (7.5%); agriculture -13.1% (14.2%); transport and communication -9.5% (9.8%); hotel, restaurant, social and informal service sectors -12.6% (15.1%) and net taxes from goods and import - 7% (7.7%).

Privatization led to a further increase in the share of the private sector in GDP. (from 71.8% in 2001 to 73% in 2002 and to 73.3% in 2003). By 2003, the private sector accounted for 53.4% in industry, 99.7% in agriculture, 88.7% in construction, 70.5% in transport, 68.9% in communication, 98.7% in trade and 71.2% in the paid service sectors.

While oil production increased by 0.3% to 15.38 mln. tons in 2003, industrial growth rate in the non-oil sector was higher than that for the oil sector. However, oil production is expected to increase rapidly in the near future as a result of the big international oil contracts signed since 1994. Thus, at present the key issue is to prepare the economy for large oil revenues and to create an effective spending mechanism taking into account the importance of developing the non-oil sector. While the oil sector has the potential to generate high income for some period, it will not lead to the creation of new jobs (currently, a total 1-1.5% of the economically active population in the country is employed in this sector and no considerable increase of this indicator is expected in the near future).

In order to manage the revenues from the oil sector, and ensure that they are used in the interests of the future development of the country, the State Oil Fund of the Republic of Azerbaijan (SOFAR) was established under the Presidential Decree of December 29, 1999. There has been an increase of 65.8% (USD 692 mln. in 2002, USD 815 mln. in 2003) in the resources of the Fund. The Oil Fund was used to finance the following in 2003: 99.8 bln. AZM for resettling the refugees and IDPs driven out from their homelands as a result of Armenian aggression and financing measures to improve their social conditions; 576 bln. AZM for financing the share of the Republic of Azerbaijan in the project of Baku-Tbilisi-Ceyhan (BTC) main export pipeline; 500 bln. AZM transferred to the state budget. The expenditure related to the management of the Fund was 4.3 bln. AZM and the amount of the resources transferred to the state budget as tax was 12 bln. AZM.

Agricultural reforms lead to a real growth rate of 6.4% in 2002 and 5.6% in 2003. The share of crop production in agricultural production was 60% and of livestock production was 40% in the reported period.

The construction sector continued to be bouyant. This was partly due to the start of construction of BTC oil and Baku-Tbilisi-Arzurum (BTA) major gas pipelines. Thus, while the volume of investments directed to fixed capital was 5.9 trillion AZM in 2001, it amounted to 10.4 trillion AZM in 2002 and 17.8 trillion AZM in 2003.

The average monthly salary of those working in the formal economy increased 17.2% in real terms (nominal 21.4%) and reached 383,100 AZM (USD 78).

4. FDIs and Integration into the World Economy

Liberalisation and the opening up of the economy have resulted in an increase in the rating of the country in some influential international organizations and in the volume of foreign investments in the economy (see Table 2.1).

Table 2.1.

Dynamics of investments in the economy in 2001-2003 (mln. USD)

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Overall more than 17.5 bln USD has been invested in Azerbaijan’s economy since independence, of which 12.5 mln. USD (71.4%) were in the 1994-2003. FDI account for more than 80% of all investments in the economy. Recently, investments in the non-oil sector, particularly to power, chemistry and petrochemistry, infrastructure and agriculture have been increasing. The amount of foreign investments increased by 46.5% in 2003, (3,273.3 mln USD); 93.5% was direct investment and 6.5% provided as credit.

Credit provided to the economy further increased in 2002-2003. Credits of 2,600.8 bln. AZM (71.9%- short-term, 28.1% -long-term) were allocated in 2002 and of 3,339.1 bln. AZM in 2003 (72.6% -short-term, 27.4% -long-term). This represents an increase of respectively 7% and 28.4% (5.7% in short-term credits and 25.3% in long-term credits) for appropriate years.

Foreign trade relations have expanded. Thus, according to the State Statistical Committee (SSC), the volume of foreign trade turnover increased from 3,745.2 mln. USD (61.8%-export, 38.2%-import) in 2001 to 3,833 mln. USD (56.5%-export, 43.5%-import) in 2002 and 5,218.2 mln. USD (49.7%-export, 50.3%-import) in 2003. In other words, the volume of foreign trade turnover increased 2.3% in 2002 (export decreased 6.3%, import increased 16.4%) and 36.1% (export-19.6%, import-57.7%) in 2003 compared to 2001.

Foreign trade relations covered 124 countries in 2003 (128 countries in 2002), out of which 10 were Commonwealth of Independent States (CIS) countries. The share of CIS was 22.7% (23.3% in 2002), of the European Union (EU) 48.7% (48.4%) and of other countries 28.6% (28.3%) in the foreign trade turnover. While the share of CIS in export was 12.9% (11.3%), of the EU 65.6% (67.5%) and of other countries 21.5% (21.2%) it was 32.4% (39.1%), 32.0 (24.0%) and 35.6% (36.9%) in import respectively.

The negative balance of USD 34.2 mln. in the country’s foreign trade balance in 2003 was connected with the increase in the import of investment-oriented goods related to realization of oil contracts.

The share of the “mineral products” category dominated in exports was 86.0% in 2003 and 88.9% in 2002. The share of oil and oil products prevailing in this group was 85.4% in 2003.

Table 2.2.

Dynamics of basic indicators of the foreign trade in 1995-2003 (mln. USD)

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2.2. Poverty Update: the results for 2002

Background

The SPPRED document and strategy is based on an analysis of poverty in the country. The analysis was done on the basis of the results of monthly per capita consumption expenditure, derived from the 2001 HBS. It also made use of a new absolute poverty line, which was discussed and approved by the SWG on Poverty Monitoring during the SPPRED formulation stage. It was estimated that 49% of the population was living below a poverty line of 120,000 AZM. In 2001 using a relative poverty line of 72,000 AZM, (60% of median per capita consumption expenditure level), the poverty level was estimated at 17%2.

The original intention was to monitor poverty levels in the country from 2001 onwards, using the same data source (HBS); the same welfare indicator (per capita consumption expenditure levels); and the same poverty lines3. However, unfortunately this has not been possible, principally for two reasons.

Firstly, the 2001 HBS was the first year of a newly designed survey. During this first year, the SSC received technical assistance from the ADB and WB aimed at further improving the survey methodology. As a result, a revised survey methodology was introduced in 2002, which affected the way in which information on consumption expenditure levels was collected and defined. Thus, although the welfare indicator used for ranking living standards of the population is the same for 2001 and 2002 (consumption expenditure), the estimates for the two years are based on different definitions and are therefore not comparable. This improvement in the quality of HBS data brings heightened value to the 2002 estimates of poverty in Azerbaijan, but unfortunately at the cost of a loss of comparability with the results of 2001.

Secondly, the absolute poverty line, which was elaborated by the Sector Working Group in the SPPRED formulation stage, has subsequently been developed further. In accordance with the Presidential Decree on the 2003 Budget, a draft version of new normatives for the calculation of the minimum consumption basket (the basis for the poverty line) has been developed by the SWG in 2003 and submitted to the CM. Once approved, these will replace the current outdated legal normatives for the minimum consumption basket, which have been in force since 1992.

Due to the above developments, this report provides poverty estimates for 2002 only based on the 2002 HBS data - and by using the revised absolute poverty line. This implies that these results cannot be used to monitor poverty changes since 2001.

It is expected that the 2002 results will serve as the benchmark for all poverty monitoring exercises in the future. It is assumed that from this year onwards, there will be no more substantial changes made in the survey methodology, and also there will be an officially approved poverty line.

Poverty Line

As mentioned above the new poverty line is based on new normatives, and has been submitted to the CM for approval. It defines a minimum consumption basket not only for food products, but also for non-food products and services. Minimum consumption norms are calculated for these three consumption categories. The minimum consumption norms are further calculated for working age males, females, the pension age population, young children and teenagers; the average minimum consumption norms are then calculated using the weight of these population categories in the overall population. (The poverty line used to calculate the poverty levels reported for 2001 in SPPRED, on the other hand, only uses minimum consumption norms for the food basket, which is taken to represent 70% of the overall consumption basket.)

The prices used to calculate the cost of the minimum consumption basket vary according to the type of product:

The value of the minimum food basket is priced using the prices actually paid by the poor population (the lowest decile in the consumption expenditure distribution range), and the prices are taken from the HBS (the same source as was used in SPPRED). For 2002, the value of the minimum food basket was 121,465 AZM and the share of the food basket in the overall minimum consumption basket is taken to be 69.4%. The share of the various baskets corresponds to their share in the consumption expenditure pattern of the poor population, as reported in the HBS results.

The value of the minimum basket for non-food products is priced using the minimum retail prices as recorded at the SSC, there are not enough observations in the HBS to use it as a source for prices of these products. For 2002 the value of the non-food product basket is estimated at 21,935 AZM and the share of this basket in the overall minimum consumption basket is taken to be 12.5%.

The value of the minimum basket for services for 2002 is calculated at 31,600 AZM and the share of this basket in the overall consumption basket is taken to be 18.1%.

The value of the total minimum consumption basket for 2002 is calculated as 175,000 AZM.

Poverty Estimates for 2002

As explained above, results for 2002 are based on the revised 2002 HBS, and by using an absolute poverty line of 175,000 AZM (described in the appendix). Within this poverty line, the overall poverty level is estimated as 46.7% for 20024.

A relative poverty line (70% of median per capita consumption expenditure) was set at 125,134 AZM5. The overall poverty level using this line is estimated at 8.8%, and this will serve as the revised estimate of extreme poverty in the country.

Poverty profile

The conclusions regarding the poverty profile for Azerbaijan can be summarised as follows:

  • As in 2001, it is found that the poverty rate is only slightly higher in urban compared to rural areas (47.8% in urban areas and 45.4% in rural areas).

  • The highest poverty incidence (62.9%) is found in the Nakhchivan AR, although only 6.1% of the country’s poor population live in this region. The poverty level of 46.3% in Shaki-Zagatala region is closer to average level.

  • In large cities the poverty level is noticeably less than in smaller towns: 44.5% compared to 53.5%. Despite the fact that the poverty level in Baku is less than the average level (40%), the largest share of the poor population (21%) lives in Baku.

Table 2.3.

Poverty Incidence by Categories of the Population (individuals)

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The above table refers to categories of individuals. We now look at data regarding household categories.

Table 2.4.

Poverty Incidence by Characteristics of the Household and Head of Household

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The main results can be summarized as follows:

The higher the education level of the head of the household, the lower probability of the household being poor. The poverty risk for households where the head of household has higher or secondary level education is less than the average poverty level in the country.

  • The poverty risk increases the greater the number of household members. The poverty risk among households with fewer than 4 members is relatively low. But the poverty risk increases dramatically once the number of members reaches 5 or more.

  • The poverty level is less than the average only among households without children and with 1 child. There is much higher poverty level among households with three, four or more children. The poverty risk for households without children is much less than the average; but only 1 child in a family increases this poverty level for 16.5%. Poverty incidence increases to 34.8% for households with 3 children and 45.5% for households with 4 or more children.

  • The poverty level of households with a male head of household is 4.8% less than that for households headed by a female head.

  • The poverty profile overall confirms the picture derived from the 2001 results, but the ranking of the regions by poverty incidence is slightly different, with Nakhchivan having a higher incidence. However, it is too early to draw policy conclusions from the above results, as they will have to be monitored in the coming years to test their robustness.

Poverty gap

For policy purposes, it is useful to look not just at the numbers below the poverty line, but at the depth of poverty, i.e. how far below the poverty line the poor are. The poverty gap for the absolute poverty line is 0.0822. In other words the average consumption expenditure of the poor population is 8.2% less than poverty line.

Inequality

Inequality is measured by looking at the distribution of income or expenditure levels among the population. The Gini coefficient is the most common measurement of inequality. Calculations using this formula show, that in 2002 the Gini coefficient was equal to 0.271 (using income distribution) and 0.276 using expenditure (calculated on the basis of the 2002 HBS results).

Further improvement of the HBS may be required in order to ensure that we are capturing all income/expenditure; including those from the informal sector and self-employment, and that incomes from the top deciles are not being underestimated.

2.3 Employment

As it was shown in SPPRED, the post 1995 period differs from the initial transition period in that it marks the beginning of economic growth, stimulated in large part by oil-related activities. However, foreign investment in Azerbaijan’s petroleum wealth has so far created relatively limited job opportunities.

Analysis of employment trends has so far been complicated by the fact that there is no labour force survey (LFS) carried out regularly, and administrative data cannot capture the effect of the informal sector on employment levels. However, the situation is changing with the introduction of a LFS, carried out by the SSC with support from the UNDP and International Labour Organization (ILO). Some results from the first round of the LFS (spring 2003) are reported below.

According to administrative data, there was a 0.6 % increase in the annual average number of employed people in the working age groups during 1998-2002 (3,701,500 3,726,000). At the same time GDP in non oil sector increased by 26.8 % which points to growth in labour productivity in the country.

Official statistics also show that in 1995-2002 the average number of employed people increased by 35% (1,112,800 1,497,500) in the agricultural sector, while decreasing by 8.2% (1,963,000 1,801,000) in the service sector and 20% (537,200 428,600) in the industry sector. It is important to note that growth in agricultural employment is directly related to the land reform, which has resulted in the allocation of small land plots to most of the rural population who are considered to be employed6.

Since output growth primarily resulted from an increase in productivity, wages and salaries rose substantially, while employment increased only marginally. The average reported monthly wage was 21.4% higher in nominal terms (22.2% in real terms) in 2003 than in 2002. The minimum wage was increased from 27500 to 60000 manat in January 2004, leading to wage increases in the public sector and increases in social benefits linked to the minimum wage.

The labour force participation rate also varies Structural changes in the economy have been accompanied by redundancies in the number of people employed in the public sector. The number of people employed in the public sector has decreased by approximately 2.1 times since 1990, and was 1.192 mln. in 2002. At the same time, the numbers employed in the non-state sector has increased by 2.3 times and was 2.535 mln. in 2002. Annual growth rates for public and private sectors show that the decrease in employment in the public sector has been greater than the increase in the private sector since 1998 (see Figure 2.2) which suggests either an increase in unregistered unemployment, or an increase in informal employment.

Figure 2.1
Figure 2.1

Annual average wage

(Per cent)

Citation: IMF Staff Country Reports 2004, 322; 10.5089/9781451802603.002.A001

Source: SSC
Figure 2.2
Figure 2.2

Growth rate of employment in public And private sectors

(Per cent)

Citation: IMF Staff Country Reports 2004, 322; 10.5089/9781451802603.002.A001

Source: SSC

Due to the relatively favourable age structure of the population, reflecting the high fertility rates in the past, decline in death rates, and an increase in life expectancy, the number of working age population in Azerbaijan increased from 3.973 mln. in 1990 to 4.988 mln. in 2002, or by 25%. In the coming years, the greater number of new labour market entrants will have a significant impact on labour supply. This growth in the young entrants especially reflects high birth rates in the 1980s.

Data on the employed and unemployed population have until now been derived from administrative sources which cannot provide a full picture of the economically active and inactive population in the country; they do not cover all the working population and cannot capture persons without work who are not registered with employment offices. For example, according to state statistics there were 50,963 unemployed persons officially registered at the employment offices in 2002, which is only 1.4 percent of the total economically active population. However, for the first time the results of the new (2003) LFS can be used to give more realistic estimates.

The results suggest that the labour force participation rate7 (LFPR) for the population age 15 years and over was 62.9%, (75.6% for men and 51,1% for women). By international standards this can be considered a high LFPR. These results are consistent with those calculated on the basis of the 1999 population census, which showed that the LFRP was 64.6%, (73% for men and 57.2% for women)8. The slight decrease in the LFPR can be explained by the higher inactivity rate for women in Figure 2.3.

Figure 2.3
Figure 2.3

Labour force participation by urban and rural areas

(per cent)

Citation: IMF Staff Country Reports 2004, 322; 10.5089/9781451802603.002.A001

Source: Labour force survey, 2003, SSC

The labour force participation rate also varies by urban and rural areas. Unemployment and inactivity rates are higher and the employment rate is considerably lower for urban areas. The high employment rate in rural areas is the main contributor to high labour force participation and employment in the country. But, as mentioned above, this is closely related to land reform in the second half of 1990s.

The employment to population ratio9 equalled 56.2%, which means that almost half of the population over 15 years depend on the income generated by other employed people in that age group. Figure 2.3 also shows that women and urban people seem to be more dependent on employed people.

Employment and unemployment rates have significant gender and age dimensions. Employment to population rates for men exceeds that for women by 23.5% point (68.4% and 44.9%). The highest inactivity rate10 for both genders is observed in the lowest and highest age groups, which are the categories dominated by the student, school-pupils and pensioner population. However, it should be also noted that inactivity rate for women in the 25 59 age groups years are significantly higher than that for men.

The overall unemployment rate11 is estimated at 10.7%. The highest unemployment rate was 23.8% among youth in the 20-24 age group. Figure 2.5 suggests that the unemployment rate among 20-24 age groups with all education level is higher than for any other age category. The highest unemployment rate was 53.6%at the 20-24 years with incomplete high education. The second highest unemployment rate was observed for the 20-29 years age group with high education.

Figure 2.4
Figure 2.4

Labour force participation rate by gender and age groups

(per cent)

Citation: IMF Staff Country Reports 2004, 322; 10.5089/9781451802603.002.A001

Source: LFS, 2003, SSC
Figure 2.5
Figure 2.5

Unemployment rate by the levels of education

(Per cent)

Citation: IMF Staff Country Reports 2004, 322; 10.5089/9781451802603.002.A001

Source: Labour force survey, SSC, 2003

The unemployment rate for the 20-29 year old age group with higher education (26%) suggests that graduates from that age group are particularly affected by the mismatch between qualifications and the skills in demand in the labour market.

2.4 Education

Background

Azerbaijan has long shown an awareness of the need to invest in and maintain its human capital, and in particular the value of having a well-educated population. The results of the population censuses, which have been carried out every ten years since 1939, show that there has been a steady increase in the literacy rate, and the latest census data (from 1999) show that the literacy rate for the country is 99%. It is estimated that 97% of the adult population have completed (at minimum) primary school education. There are no significant gender differences in literacy rates and completion of primary education.

The links between education and poverty are well documented. A better-educated population is inter alia more able to find employment, and is more likely to bring up a healthy young generation. The results of the latest HBS (2002; see Charter 2) confirm that the higher the level of education of the head of the household, the lower the probability that the household will be poor.

However, the SPPRED document has pointed out that, despite its impressive educational achievements, Azerbaijan is currently facing serious problems in maintaining the quality of its education system, and in adapting it to the demands of a transition economy. There are signs that the younger generations are not investing in their education, that it is not being looked upon as a tool to defend them from poverty; i.e. the returns to education are not considered worth the investment required to go beyond the compulsory stages of education. There is a danger that this will lead to a certain decline in the country’s human capital.

The SPPRED document states clearly that one of the main strategic aims of the country is to maintain the good education indicators inherited from the Soviet period, while also re-orientating the country’s education system to the needs of a market economy. One of the six key strategic aims of SPPRED is “to improve the quality and equality of access to basic health and education services”. Within the education sector, SPPRED stipulates 12 policy directions aimed at both improving the quality of education and equality of access. SPPRED also envisages a rationalisation of education expenditure, to be achieved through rationalisation of the teaching staff (see MTEF). The rationalization measures are to be accompanied by a rise in teachers’ wages and a new system for linking performance to bonus payments.

Education and the MDGs

MDG number 2 is formulated at the global level as “achieve universal primary education” (see Chapter 1). According to the 1999 census data for Azerbaijan, 975 out of every 1000 persons in the 15-24 age group had completed at least primary school education. In this index, women are slightly ahead of men (980 per 1000 compared to 971 for men); and there are almost no urban and rural differences (975 compared to 976). Thus clearly MDG number 2 will have to be adapted to reflect the fact that universal primary education is already a reality in Azerbaijan.

As mentioned above, one of SPPRED’s key strategic objectives, is to improve the quality of, and equity of access to, basic education services by 2005. Within this framework, discussion has begun on identifying a country specific MDG for Azerbaijan in the field of education.

Comparison of the 1989 and 1999 census data shows that the share of the population over 15 years old with secondary education (complete and incomplete) has increased significantly. This figure was 878 per 1000 in 1989, 909 in 1999 and 909, 910, 910, 911 in 2000, 2001, 2002, and 2003 respectively (see Table 2.5). It may be appropriate for the country to aim to improve its enrolment rates for secondary education further, especially for upper secondary education. However, this will be a viable goal for Azerbaijan only, if efforts are continued under SPPRED to improve the quality of education in secondary schools. Participatory discussions carried out in 6 regions of Azerbaijan have shown that the population considers improving quality of education and access to secondary education as one of the main problems (see Chapter 7 for details on the Regional Workshops held in 6 regions). For this reason the goal of achieving universal primary and near-to-universal secondary education (11 classes) is put forward as a tentative proposal for a country-specific MDG.

Table 2.5.

The education level of ages 15 and above. (1999 census data)

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Source: SSC

As mentioned above, the literacy rate of population according to the 1999 census data is 99%. The literacy rate of 15-24 year olds (MDG indicator 8) is not therefore considered appropriate for Azerbaijan, however it should still be monitored for the purpose of international comparison.

Trends in Education Indicators

(a) Pre-school education (3-6 years)

Pre-school education in Azerbaijan has suffered a considerable decline over the last decade. This is partly due to the disappearance of pre-school facilities, which were provided under state enterprises and local government in the Soviet period, and partly due to the priority given by the government to concentrating resources on maintaining basic/secondary education. The number of pre-school facilities decreased steadily in the 1990-2002 period (a total of 404 facilities closed down). While gross enrolment rates for children in pre-school institutions decreased by 5% in 1990-1995, this figure has increased by 1% annually from 1997 onwards. Despite this, overall gross enrolment rates remain relatively low (19% in 2002; see Table 2.6), and there are significant differences between urban and rural enrolment rates.

Table 2.6.

State Pre-school Facilities

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Source: SSC
(b) Basic education

Basic education covers primary education (classes 1-4); middle secondary (classes 5-9); and upper secondary (classes 10-11). Enrolment in classes 1-9 is obligatory.

Gross enrolment rates for primary school (classes 1-4) were relatively low in 1990 (84.2%), but have since increased to 98.8%. The tendencies in middle secondary education in 1990 - 2002 resemble those reported in primary education. The gross enrolment rate for children in the 5-9 classes peaked in 1990 (90.2%). A decrease in the gross enrolment ratio was observed in 1998-99 (12% lower compared to 1990). Since 2000 this index increased and in 2001 and 2002 the gross enrolment ratio was close to the 1990 rate. Gender differences in the net enrolment rates are again very slight. But since 2000 gross enrolment rates in urban areas have been higher than in rural areas: in 2000 by 5.4%, in 2001 by 8.7%, and in 2002 by 12%.

Table 2.7.

Gross enrolment ratio for basic education (classes 5-9)

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State and private

Urban enrolment rates
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State and private

Rural enrolment rates
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State and private

Source SSC

In order to estimate the quality of and access to the basic education it would be more relevant to compare the enrolment rates with attendance rates. Both the SSC and the Ministry of Education (ME) do not provide such kind of information.

(c) Upper Secondary education (classes 10 - 11)

Unlike the previous stages of basic/secondary education, upper secondary education is not obligatory. However, enrolment in these classes has a direct impact on the numbers and quality of applicants for higher education. The results of the 1999 census showed that 41% of the urban population and 50% of the rural population had completed full secondary education. The gross enrolment rate for 10th-11th classes in 2002 (63.4%) almost reached the pre-transition (1990) rate of 66.7% (see Table 2.8).

Table 2.8.

Gross enrolment ratio for upper secondary education (classes 10-11)

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State and private

Urban enrolment
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State and private

Rural enrolment
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State and private

Source SSC

The net enrolment rates for 10th-11th classes were 43.2% in 2001, and 63.4% in 2002. This sharp increase is due to the school reforms of 1989, which introduced 11 years of schooling instead of the traditional 10 years. As can be seen from Table 2.8, there are some gender differences in enrolment rates. In 1990 female enrolment rates were slightly higher than male ones in upper secondary education both in urban (6.1% higher) and rural areas (4.7% higher). This tendency is still noted in urban areas. There has been a small but consistent discrepancy between enrolment rates in urban and rural areas (65% for urban areas in 2002 and 62% for rural areas). Again information on attendance rates is not available.

(d) Vocational education

One of the main strategic objectives of policy measures in the education sector is to ensure that vocational education provides skills appropriate to market economy. Enrolment rates in vocational education have declined considerably over the last years: from 1990 to 1995 the gross enrolment rate decreased by 10.6%, and in 2002 this indicator was 12.6% below the 1990 level.

(e) Higher education

Higher education has always occupied a special place in Azerbaijan. The first University in Azerbaijan was founded in 1918, and at the time of the first Democratic Republic. Baku State University was also the first educational institution in the Moslem East. Many higher education institutes were established in the Soviet period. The results of the population censuses from 1939 onwards show a steady increase in the number of people with higher education between 1939 and 1999. If in 1939 there were 10 persons (per 1000) with higher education, in 1999 the figure was 91. Female enrolment rates also steadily increased in the pre-transition period, however, Table 2.10 shows that female enrolment for higher education courses is still slightly lower than male enrolment.

Table 2.9.

Gross enrolment rates in vocational education

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Source SSC
Table 2.10.

Gross enrolment rates in higher education (for 17-22 year olds)

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Source SSC

2.5 Health

Background

Poverty is closely connected with the population’s health status. Poor health indicators affect individuals’ well-being, their potential to earn income, and children’s ability to attend and perform well at school. Poor people sometimes do not have enough financial resources to use available health services, or just do not have access to basic services. Individuals with poor health are more likely to pass on their poverty to their children, and thus create a vicious cycle of poverty.

The available data on health indicators suggest that in the first years of independence the health status of the population deteriorated. However there are some signs that the negative trends have been reversed since the mid 1990s (see SPPRED Chapter 1).

SPPRED envisages a series of policy measures which will help ensure equal access to basic health services, and improve the quality of primary health care services. A total of 11 policy directions were identified to address these problems. The problems of guaranteeing quality of basic services have been compounded in the transition period by the drop in the share of government expenditure going to health sector, as well as by the drop in real wages of health sector employees12. The latter has contributed to the rise in informal payments in the sector. The combination of formal (paid services and costs of medicine) and informal payments means that parts of the poor population cannot afford to use public health services. The 11 policy directions also incorporate measures aimed at improving child and maternal welfare, and combating diseases such as HIV/AIDS, tuberculosis and malaria, which are most likely to affect the poorer sections of the population.

There are three MDGs which are linked to SPPRED’s objectives within the health sector, namely reduction of child mortality (goal 4); improving maternal health (goal 5); and combating HIV/ AIDS, malaria and other diseases (goal 6). The links of these goals to SPPRED, and the problem of setting country specific targets for these are discussed below.

Public Expenditure on Health

Public expenditure on health care as a share of GDP and a share of total budget expenditures has gradually decreased in the transition period (Figure 2.6). In 2002 public health expenditure totalled about 0.8% of GDP in comparison to 2.8% in 1990. This is the lowest level of expenditure among CIS countries, and is one of the lowest in the world13. (The average level for low-income countries is about 1.2% of GDP)14. SPPRED envisages a rise in public expenditures on health to 1.2% of GDP by 2005. The share of health expenditures in total budget expenditures also dropped from 8.9% in 1990 to 4.8% in 2002. The decrease in public expenditure on health has contributed to the deterioration in the quality of healthcare services and indirectly to the deterioration in the population’s health status.

Figure 2.6.
Figure 2.6.

Public expenditures from the state budget on health care

Citation: IMF Staff Country Reports 2004, 322; 10.5089/9781451802603.002.A001

Source: SSC

Child Welfare: Infant and Under Five Mortality Rates

According to official statistics, infant mortality (death of child before reaching 1 year of age) rates peaked in 1993 (28.2 per thousand live births) and have since gradually decreased. In 2002 the official infant mortality rate was 12.8 per thousand live births. The under-five mortality (death of child before reaching 5 years of age) rate also increased until the mid 1990s (45.2 per 1000 children in 1994), after which it began to decrease, reaching 23.1 per 1,000 in 2002. More than half of under-five mortality is caused by infant mortality.

Figure 2.7.
Figure 2.7.

Infant and under-five mortality rates

Citation: IMF Staff Country Reports 2004, 322; 10.5089/9781451802603.002.A001

Source: SSC

These official statistics are based on administrative data collected from medical facilities. However, evidence from survey data suggests that official statistics underestimate the real situation in the country. Two recent surveys have provided much higher estimates of infant and under 5 mortality. The results of UNICEF’s Multiple Indicator Cluster Survey (MICS)15 suggest that the infant mortality rate was close to 79 deaths per 1,000 infants and the child mortality rate (under 5 years old) was 102 in 1996. Infant mortality accounted for more than 77% of under 5 mortality. The results of the Reproductive Health Survey (RHS)16 carried out in 2001, provide an estimate of 80.8 for infant mortality and 92.2 for under 5 mortality for the 1991-2000 period. Infant mortality rate accounts for 88% of under 5 mortality. The RHS results suggest that infant and under five mortality declined in the 1996-2001 period, compared to the 1991-95 period (infant mortality from 74.4 to 85.9 and under five mortality from 96.8 to 88.4).

Discrepancy between official and survey results for infant and under five mortality

Administrative data: There is some evidence that infant mortality rates may be underestimated due to the way in which administrative data is collected.

1. Registration of infant deaths. Until recently official statistics were based on two sources: one was administrative data collected through the MOH and the other source was administrative data collected through the SSC. The MOH collects data from medical facilities (monthly from maternity hospitals and annually from pediatric wards and polyclinics). However, medical facilities may misclassify very premature babies as miscarriages, and early neonatal births as stillborns, because infant mortality is often used as an indicator to evaluate the performance of the facilities. Infant deaths following home deliveries may not always be reported. The SSC used to collect the data from urban and rural civil registry bureaus (where relatives apply for official death certificates). Infants who die before having birth certificates issued may remain unregistered as either a live birth or an infant death. Infants delivered at home are most likely not to be registered. So, the data given by SSC reflected more cases of mortality than MOH data. Now the SSC only publishes the data from medical facilities in order to accelerate the process of data collection.

Survey data: The survey data is derived from sample surveys. In the case of Azerbaijan there have been two sample surveys carried out in recent years, namely the MICS carried out by UNICEF and the SSC in 2000 and the Reproductive Health Survey carried out in 2001. The samples are designed in such a way as to ensure that the results can be considered representative for the whole country. As with all survey data, there are confidence intervals within which we can estimate with 95% confidence where the true value lies. Thus for infant mortality the estimate from the RHS is 80.8, but the rate could be within the range of 72 to 89.6 (see RHS, pp103-104).

2. Definitions: Until 2001, Azerbaijan used the Soviet definition of infant mortality, which did not count as live births premature and low-birth-weight babies who die within seven days after birth. Any infant with signs of life present at the time of delivery but whose weight was less than 1,000g, had a gestational age of less than 28 weeks, or measured less than 35 cm and died within the first 7 days of life was classified as a miscarriage or stillbirth. (RHS p105) The WHO standard definitions include any infant born alive, irrespective of the duration of the pregnancy that breathes or shows any other signs of life after separation from the mother. This difference means that the survey is more likely to have higher estimates for early neo-natal mortality (first 7 days of life). This cannot account for all the difference between official data and survey estimates. Under-reporting of births and infant deaths to civil registries, particularly those for infants not delivered at medical facilities is likely to be the most important reason.

To summarise: there are problems with both of the sources of information on infant and under five mortality rates. However, both sources should be used for monitoring, and efforts should be made to improve data collection using both survey and administrative methods. Measures are already being taken to improve the registration of infant and child deaths (see below).

Child Welfare: Malnutrition, Breastfeeding and Immunization

The country has no regular way of collecting information on wasting and stunting of children, which is a good way to monitor child health status. These indicators are the direct results of children’s malnutrition. The RHS provided one-off estimates for 2001 and UNICEF’s MICS survey for 2000. It is planned to repeat the MICS survey in 2004. Repetition of such surveys every 3-4 years would be extremely useful in monitoring poverty and living standards, and the effects of poverty on children’s health and development.

According to the MICS results, the proportion of under-five stunting (height-for-age) children in 2000 in Azerbaijan was 19.6%, of underweight (weight-for-age) children 16.8% and of wasting (weight for height) children 7.9%. The first two indicators were higher in rural than urban areas: 21.7% to 17.2% and 18.5% to 14.9%, respectively. Regionally, the highest levels of these indicators were found in Nakhchivan (23.7% and 19.6%, respectively) and Western & South-West regions (25.1% and 22.4%). The estimates for the third indicator for urban and rural areas were almost equal 8.0% to 7.9% and the highest level was observed in Western & South-West (10.7%), and Central & Northern (8.3%) regions. According to the RHS, the prevalence of chronic malnutrition (height-for-age) among children aged 3-59 months was 13.3%, general malnutrition (weight-for-age) 6.8%, and acute malnutrition (weight-for-height) was 2.4% in 200117. Usually, a low weight-for-age is considered an indicator of chronic malnutrition when a low prevalence of acute malnutrition exists. Because the total rate of acute malnutrition was low among under-five (3-59 months) Azeri children, the 6.8% rate of general malnutrition is probably a reflection of the higher rate of stunting in children18. RHS also provided higher estimates for stunting (chronic malnutrition) and underweight (general malnutrition) children in rural areas 15.9% and 7.8%, respectively (the indicators were 10.6% and 5.8% in urban areas). Regionally, children living in Southern (18.3%) and North & North-East (14.7%) regions had the highest levels of chronic malnutrition, and the problem of general malnutrition was greater among children living in North & North-East (8.7%), South-West (8.0%) and Southern (7.5%) regions than in other regions of the country. The highest levels of acute malnutrition were found in North & North-East (3.2%) and Central (3.1%) regions of Azerbaijan. Both MICS and RHS surveys revealed, that stunted and underweight children are mostly among those aged 12-23 months. Height-for-age and weight-for-age data for this age group were equal to 30.7% and 28.0% in MICS survey, and to 17.3% and 8.9% in RHS survey.

There are several initiatives being undertaken to improve the health and well-being of infants and young children. Breastfeeding plays a significant role in the healthy development of children. The WHO recommendations state that “infants should be fed exclusively on breast milk from birth to 4 months of age” (RHS, pp 101). According to the SSC, about 30% of all infants are exclusively breast-fed until 3 months (see Figure 2.8). According to MICS, only 9.4% of infants under 4 months of age are exclusively breast-fed. According to RHS, 94.7% of all children born during 1996-2001 were breast fed for at least a short period of time; the average duration of exclusive breast-feeding was 0.4 months, full breast-feeding19 3.3 months, and any breast-feeding 11.6 months.

Figure 2.8.
Figure 2.8.

Breast-feeding of infants (% of breast-fed infants to tota l number of children at 1 year)

Citation: IMF Staff Country Reports 2004, 322; 10.5089/9781451802603.002.A001

Source: SSC

Immunization programs are being implemented in the country to help prevent child diseases. The MOH carries out immunization programs with the assistance of World Health Organization (WHO) and UNICEF. Under the National Program “Expanded Program on Immunisation” (EPI), all children are immunized for BCG, DTP, DT, Measles and Polio. In 2002 the proportion of under 1 year children covered with vaccination against TB was 99.1% and against measles 98.8% (Figure 2.9). As a result of implemented measures, our country has succeeded in eliminating a range of childhood diseases. Thus, Azerbaijan received Certificate on Polio-Free Country in Europe in 2002 and further more immunization coverage against measles in Azerbaijan is one of the best in the world.

Figure 2.9.
Figure 2.9.

Proportion of under 1 year children covered with pro p hylactic vaccination

Citation: IMF Staff Country Reports 2004, 322; 10.5089/9781451802603.002.A001

Source: SSC

Maternal Welfare: maternal mortality, reproductive health, abortion rates, use of contraceptives

According to official statistics, the maternal mortality ratio increased from 9.3 per 100,000 live births in 1990 to 19.9 in 2002 (Figure 2.10). However, the main increases were in the 1990-99 period, when the indicator peaked at 43.4 per 100,000 live births. Since then there has been a steady and notable improvement in the indicator.

Figure 2.10.
Figure 2.10.

Maternal mortality (deaths of pregnant women during pregnancy, childbirth and puerperium), per 100,000 live births

Citation: IMF Staff Country Reports 2004, 322; 10.5089/9781451802603.002.A001

Source: SSC

However, as with child and infant mortality, there is some evidence that official figures underestimate the incidence of maternal mortality. Mothers who die from pregnancy and postpartum complications at home (after home deliveries or after being discharged from hospital) are not usually recorded as maternal mortality. According to the results of UNICEF’s MICS survey, the maternal death rate was 79 persons per 100,000 births in 1988.

The official estimates of maternal mortality rates in Azerbaijan are close to those reported for high income countries (12 per 100,000 live births20), and survey data suggests that the estimates based on administrative data may lead to an underestimation of the indicator. (The average maternal mortality rate is equal to 118 per 100,000 live births in middle income countries and 463 in developing countries21).

Women sometimes deliver their children in younger ages, which increases health risks for themselves and their children. According to Social Monitor 2003, the share of births to mothers under age 20 increased from 4.7% of total live births in 1990 to 9.7 in 200122. According to WB estimates, births per 1,000 women ages 15-19 in Azerbaijan was 44 in 200223 (there are no regular official statistics on teenage births). The figure was 104 in low income and 24 in high income countries.

One of the factors affecting maternal health is increase in the number of childbirths not assisted by skilled health personnel. According to the results of a survey carried out by SSC in 2001, only 79% of women complete pregnancy with delivery in hospital. According to RHS, the proportion of births with skilled attendants present at delivery was 89% in 1996-2001 period. According to the results of UNICEF’s MICS survey (2000) calculations, the share of women reporting skilled attendant at delivery (i.e. attendance by a doctor, a nurse, or a midwife) was 87.5% in the year before the survey24. This figure was 75% among poor households25. The percentage of women receiving prenatal care services from skilled health personnel was 69% (52% among poor people).

There has been a reduction in abortions compared to 1990, mostly due to the fact that government with the assistance of international organizations has extended family planning services to the population, but abortion is still a common method of interruption of unwanted pregnancy. According to official data, abortions per 1,000 females aged 15-49 years has decreased from 13.3 in 1990 to 7 in 2002 (Figure 2.12). In comparison to this, abortions per 100 births has increased from 14.0 to 17.6 in the same reference period. This is due to the fact that there has been a steep decrease in the birth rate, but not in the abortion rate. The “lifetime” abortion rate (i.e. the average number of abortions per woman in the fertile age group) also tended to decrease according to official statistics. Statistics of the Union of Soviet Socialist Republics (USSR) showed a pre-independence lifetime abortion rate of 0.8 abortions per woman aged 15-49 in Azerbaijan, the lowest level among former Soviet Union countries (Brackett, 1993)26. The MOH gives an estimate of 0.3 lifetime abortions per woman for the 1998-2000 periods27.

Figure 2.11.
Figure 2.11.

Proportion of mothers completing pregnancy with delivery in 2001:

Citation: IMF Staff Country Reports 2004, 322; 10.5089/9781451802603.002.A001

Source: SSC
Figure 2.12
Figure 2.12

Abortions and births

Citation: IMF Staff Country Reports 2004, 322; 10.5089/9781451802603.002.A001

Source: SSC

Again, survey data produces different estimates from those produced on the basis of administrative data. The RHS results suggest that the general abortion rate (the number of induced abortions per 1,000 women in a certain year) in the 3 years before the survey (May 1998 April 2001) was 116 abortions per 1,000 women aged 15-44. The lifetime abortion rate was also higher: 3.2 abortions per woman in 2001, in comparison with 0.3 abortions per woman (official data). Abortions are prevalent particularly among women in the 25-34 age group (55% of all abortions). The difference between the official abortion rate and the survey result can be explained partly by the difference in data collection (the survey data are based on information per 1,000 women aged 15-44, whereas the official data per 1,000 women aged 15-4928); but also by data registration problems in state health care facilities; underreporting of abortions performed in the private sector; and abortions performed outside clinics.

The reduction in abortion rate is mirrored by an increase in the use of contraceptives over the same period. Figure 2.13 shows that the use of contraceptive agents per 100 women aged 15-49 has increased significantly in the post-Soviet period, contributing to a reduction in the risk of morbidity of people with venereal diseases and HIV/AIDS. Figure 2.14 shows the proportion of respondents using contraceptives disaggregated by age group. The survey carried out by SSC in 2001 shows that the proportion of contraceptive users is low among youth and adults in comparison with the respondents aged 25-39.

Figure 2.13
Figure 2.13

The use of contraceptive agents

(per 100 women of the age 15-49)

Citation: IMF Staff Country Reports 2004, 322; 10.5089/9781451802603.002.A001

Source: SSC
Figure 2.14
Figure 2.14

Propotion mothers using contraceptive (by age groups)

(percent) (2001)

Citation: IMF Staff Country Reports 2004, 322; 10.5089/9781451802603.002.A001

Source: SSC, Based on a survey of mothers during last pregnancy at maternity units

To protect the poor from the economically negative results of large families and the costs and suffering of abortions, modern methods of contraception should be made available to them. The RHS also notes the increase in contraceptive use, which has accompanied the decrease in abortions. Before 1990, USSR health statistics reported that the lowest use of contraception (7%) among the former Soviet Union countries was in Azerbaijan (1993)29. The results of the RHS suggest that the current contraceptive prevalence among currently married women of reproductive age (15-44 years) is 55.4%. Only 11.9% of women in this category use modern methods, the rest 43.5% traditional methods. According to MICS, 55.1% of all women of reproductive age (15-49 years) are using any contraception (15.8% modern methods, 39.3% - traditional methods).

Maternal health depends not only on the quality of maternal health services, but also on access to these services. Official figures show that the number of female consultation units, child polyclinics and ambulatories decreased from 1034 in 1990 to 879 in 1999 but increased again to 917 in 2002. The number of beds for women who are just recovering from deliveries and childbirth did not fluctuate significantly (between 7,300 and 7,600) in the post-Soviet period and in 2002 the number was the same as in 1990 - 7,400.

Disease Incidence: HIV/AIDS, Malaria, and Tuberculosis (TB)

The spread of HIV/AIDS poses a serious risk to the population’s health. The official statistical data show that the prevalence of HIV/AIDS has increased during the past period, but is still relatively low. According to the SSC the number of registered AIDS infected persons and HIV infectors was 97 in 2002 (Figure 2.15). There is some discrepancy between the data given by SSC and the Azerbaijan National Centre in Respond to AIDS. According to the latter, the number of HIV detected people was 105 in 2002 and the total number of HIV infected people 556 by July 1, 200330. However, the actual number of HIV carriers could be significantly higher than registered, because the awareness of people about HIV/AIDS is low, and only a very small part of population take HIV tests (although efforts are being made to increase the amount of testing carried out; see below). In most cases infected people do not take the test for HIV/AIDS and remain unaware of their infection. For example, according to Azerbaijan National Centre in Respond to AIDS, only 164170 HIV tests were carried out in 2002, and more than 3,600,000 in the period of 1987 2002. The low level of use of contraceptives and the low awareness of people of HIV/AIDS means that there is a relatively high risk of being infected. The National AIDS Centre carried out a survey of HIV-infected citizens. The results suggest that about 90% of the respondents had no idea about AIDS before being infected with HIV. According to the RHS, 74% of women in fertile age have heard of HIV/AIDS, but 72% of women could not spontaneously state any main way of avoiding HIV infection. Lack of any preventive knowledge is higher among rural residents (84%), women younger than age 20 (83%), never married and sexually inexperienced women (78%), respondents with less than complete high school education (84%), women of low socioeconomic status (82%) and non-IDP women living in IDP settlements (83%).

Figure 2.15
Figure 2.15

Dynamics of HIV detection

(persons)

Citation: IMF Staff Country Reports 2004, 322; 10.5089/9781451802603.002.A001

Source: SSCSource: Azerbaijan National Centre in Respond to AIDS

The HIV surveillance system was introduced in Azerbaijan in 1987, and the Azerbaijan National Center in Respond to AIDS was established in 1990 as the only MOH institution responsible for the coordination and supervision of activities for the prevention of HIV in the Republic. The Center has 12 regional offices. The Center guarantees quality, confidentiality of consultations and tests as well as keeps received results strongly confidential. There are services of 24 hours anonymous consultation and testing on AIDS and telephone of trust functional at the Center since May, 1997. Besides the National AIDS Center, there is one NGO, “Imdad-SOS”, which was set up in 1998, to provide moral, material, social and psychological help to people with HIV/AIDS. It deals with more than 200 HIV/AIDS patients, their close relatives as well as lawyers, psychologists, sociologists, teachers and physicians.

Malaria and TB incidences have also increased in comparison with 1990, partly due to the drop in living standards experienced by large sections of the population in the early transition period, and the drop in the quality of basic health services. In 2002 the number of new TB cases was 54.5 per 100,000 population. This is 1.5 times higher than the level of 1990. Malaria incidence was 505 persons in 2002 in comparison to 24 in 1990, however, there has been a decrease in the latest period.

Figure 2.16
Figure 2.16

Tuberculosis incidences

(per 100,000 population)

Citation: IMF Staff Country Reports 2004, 322; 10.5089/9781451802603.002.A001

Source: SSC
Figure 2.17
Figure 2.17

Malaria incidences

(persons)

Citation: IMF Staff Country Reports 2004, 322; 10.5089/9781451802603.002.A001

Source: SSC

Country Specific MDGs

There are three MDGs, which relate to health issues and health indicators, namely: goal 4 (reducing child mortality), goal 5 (improving maternal health), and goal 6 (combating HIV/AIDS, malaria and other diseases).

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Under 5 mortality rate:

Given the measures being introduced under SPPRED, it is hoped that child and infant health indicators will continue to improve over the coming years. Reducing under 5 mortality rates by two thirds by 2015 would imply a target of 14 per 1000. Given that the SPPRED measures will take some time to have effect, it might be possible to aim for a modest decrease to be achieved in the 2002-2005 period (for example, a target of 21 by 2006), and to reach 14 by 2015. (Current rates for Eastern Europe are 20 for males and 16 for females31).

Since under 1 mortality accounts for 80% of all child mortality, it is considered useful also to have a country target for infant mortality. Reducing infant mortality by two thirds would imply decreasing from 23 to a target of 8 per 1,000 live births. This is lower than the current average for Eastern Europe (14) and for Western Europe (13)32. As with under five mortality, it would be more appropriate to aim for the current rates in Eastern Europe, and the target could therefore be set at 20 for 2006 and 14 for 2015.

However, given the current discrepancies between official data and survey data, and the ongoing efforts being made to improve the quality of the official data, it may be necessary to review any targets as changes in data collection and official estimates become available.

It is also considered advisable to set targets based on survey data, since this data will continue to provide a useful alternative source of estimates for infant and child mortality. The next MICS survey is scheduled to be carried out in 2004. A possible target could be to reduce the under five mortality rate from 102 per 1,000 to 95 by 2006, and to 50 by 2015. Infant mortality could be reduced from 79 to 74 by 2006 and to 40 by 2015 (80% of 50).

However, discussion on setting concrete targets is still taking place, and country-specific MDG targets will be set in the context of SPPRED and will be in line with targets and indicators used for SPPRED implementation.

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Country Specific MDG Targets

Maternal mortality rates: SPPRED aims to improve maternal health through improvements in the quality of maternal health services and improving access to these services. As with infant and under 5 mortality rates, it is considered advisable to use two targets, one based on official data, and one based on survey data. (It is assumed that efforts to improve data collection for official data will be continued, and that surveys will be repeated.)

Target based on official data: 1990 is not a good base line, because it is much lower than the following years, and does not reflect the problems which the country is struggling to cope with in transition. Therefore it is suggested to take 1995 as the base year for official data. A reduction by three quarters in the maternal mortality rate would imply a reduction from 37 to circa 13 for 2015. The target for 2006 could be 35, since it will take some time for the improvements in maternal health services to have effect.

Target based on survey data: If we take 79 deaths per 100,000 live births as the proxy baseline for 1990 (the data refers to 1988), a reduction by three quarters implies a target of 27 for 2015. (Maternal mortality rates range very widely within Eastern and Western Europe and it is difficult to give one figure as a reference point (from 4 to 58)33. However a tentative target for 2006 could be 74 (94% of 79).

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Discussion of country-specific targets for the above so far have been inconclusive. Targets and indicators for HIV/AIDS are particularly problematic, due to the low number of tests currently carried out in the country.

2.6 Poverty Reduction, Economic Growth and Environmental Sustainability

Background

Ensuring environmental sustainability is an important goal in itself, but it is also linked to other poverty goals, such as improving the health status of the population, since land, air and water pollution have negative effects on the population’s health. It is now also generally accepted that economic growth has to be environmentally sustainable: only wise and prudent use of natural resources will ensure that future generations can continue to enjoy economic growth and development.

Azerbaijan inherited serious ecological problems from the Soviet era. Industrial development was achieved at the expense of the damaging effects of pollution on people’s health and on the natural environment. Some aspects of this pollution had a direct impact on the lives of the people, while others have had a long-term negative direct or indirect impact through the pollution of land, air and water.

There are many links between the natural environment and the living standards of the people. We have already pointed out that a polluted environment affects the health of the population, but low living standards can also in some circumstances lead to a worsening of ecological problems, eg the over-logging of forests for cheap firewood; while land pollution can reduce the access of the poor in rural areas to land for cultivation.

The main environmental problems currently facing Azerbaijan can be summarized as follows:

  • Ecological problems/ pollution arising from the previous Soviet industrial and agricultural policies

  • De-forestation which has accelerated in some areas in recent years due to the lack of reliable energy supplies (gas and electricity) to regions for heating

  • Lack of piped water in rural areas, and the quality of piped water in urban areas

  • Pollution of the Caspian Sea

Land

The territory of Azerbaijan covers an area of 86.6 thsd m2. The natural geographic territory of the republic is characterized by a predominantly moderate climatic zone and semi-desert plants covering. 54.8% (2001) of the total area of the republic consists of arable land. The average population density is 94.7 persons per km2. The arable land per capita is 0.59 hectares.

Table 2.11.

Distribution of land

(percent of total)

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Source: SSC, 2002

The land has suffered negative effects as a result of industrial activity, natural disasters, land erosion and salinity. Areas used for industrial and agricultural purposes have been most affected. Erosion, salinity and pollution of land mean that local populations have more restricted access to land and are thus more vulnerable to poverty.

A total of 3.7 million ha of land is affected by erosion, and of these 3 million ha is affected by water erosion. The latest figures suggest that 1.2 million ha of land is affected by salinity. The main reasons behind salinity are irrational meth ods of irrigation and damaged infrastructure.

The total area of land affected by pollution is estimated at 30,000 ha of which 14,000 ha is polluted by oil and chemical agents. By polluted land we understand land that is polluted by man-made sources: transport, industry, over-use of pesticides etc. In general, the proportion of heavy metals in polluted land is several times higher than that in non-polluted land. Thus lead content is 8 times, nickel content is 2 times, zinc is 50-60 times and copper is 10 times higher in polluted lands.

Table 2.12.

Land affected by harmful exogeneous factors

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Source: National Program on Environmentally Sustainable Social - Economical Development, 2002

SPPRED envisages several measures to tackle land pollution, namely land recultivation on the Apsheron peninsula, de-contamination of land from mercury and other harmful substances and preparation of the waste management project.

As Table 2.13 shows, the emissions of harmful substances from industrial enterprises, which represent the main source of air pollution, has been decreasing in all the large industrial cities apart from Baku. However, it should be noted that economic recovery is now underway, and it will be important to monitor pollution levels over the coming years.

Table 2.13.

Emissions of Harmful substances from stationary sources (thousand tons)

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Source: SSC, 2002

Air pollution

Noticeable changes have taken place in both the scope and origin of the harmful emissions in the republic over the last years. If under the Soviet Union the harmful emissions were mainly of chemical and petrochemical origin, these have decreased in the transition period.

Figure 2.18
Figure 2.18

Air pollution from stationary sources

(per persons/kg)

Citation: IMF Staff Country Reports 2004, 322; 10.5089/9781451802603.002.A001

Source: SSC

The main reasons for air pollution in these cities are the wear and tear of equipment and out-dated technology, which have not been renewed for the last 40 years. At the same time there has been a rapid decrease in the use of natural gas as a fuel for the thermal power stations, and the use of highly sulphurous mazut, regular non-fulfilment of planned and necessary protective measures and lack of sufficient investment for environmental protection.

Figure 2.19
Figure 2.19

Carbon Dioxide emissions per capita (metric tons)

Citation: IMF Staff Country Reports 2004, 322; 10.5089/9781451802603.002.A001

Source: SSC

The 28th indicator of MDGs envisages monitoring the level of carbon dioxide per capita. Starting from 1992, with the financial support from the UNDP, the National Center for Climate Changes monitored this indicator. There is no available information from 1999 onwards as the above-mentioned project has finished. Currently SSC does not collect information on this topic.

Water pollution

There is a shortage of drinking water in Azerbaijan. Overall water resources in the country are estimated at 29.7 bn. m3. The water sources of the country are not sufficient to guarantee supply at the required level. On top of this there is inefficient use of the available water resources and this is made worse due to the losses which occur in the water supply systems.

The irrigation system comprises of 10 main canals and 2 water escape collectors. In the Republic, 4.1% of all permanently active canals (38,900 km in length) have artificial coatings, and 95.9% have ground canal beds; this results in the loss of 2.5 - 3.0 billion m3 of water. This also causes the rise of ground water level, as well as secondary salinity and the flooding associated with it. Inefficient irrigation and drainage channels lose up to 50% of the water which they carry. At the same time half of the water supplied for the Absheron peninsula is lost. This figure in the republic amounts to about 30% of all water supplies for the year 2002.

The amount of national water resources, estimated on a per capita basis of per unit of the land area, is smaller in Azerbaijan than in neighboring countries.

Estimations show that according to the amount of water resources per 1 km3 of land area and per capita, the worst situation is in the Mughan-Salyan zone (3 and 7), Absheron Peninsula (15 and 0.04), Araz lowland (19 and 0.04), Mill-Garabagh region (39 and 0.5), Gazakh region (74 and 1.3) and Nakhchivan (17 and 1.6).

Serious problems also remain in the supply of drinking water to households. Generally, the poor condition of infrastructure restricts the possibilities for the population especially in the rural settlements to get access to piped water.

According to the results of the 2002 HBS, 62.0% of the population has access to the improved water sources using various sources.

According to another survey carried out by the SSC35, 84% of the houses in the cities and only 11.2% of the houses in the villages were provided with the piped water. The administrative data shows that access of population to the improved water sources was 94.2% in urban areas, 11.2% in rural areas. According to UNICEF’s MICS (carried out in 2000), 76.3% of the population has access to piped water.

SPPRED is addressing the problem by tackling the rehabilitation of the internal water distribution network in a number of cities of the republic Ganja, Shaki and etc. with support of donor organizations.

However, the problem in Azerbaijan is not just that of guaranteeing the supply of piped water, it is improving the quality of the water.

A study carried out in 2002 by the Sanitary-Epidemiogical Center under MOH shows that there are still some water resources which exceed the norms for bacterial, chemical and radioactive content.

As it can be seen from the Figure 2.20, the amount of waste water in ground water over the last 10 years decreased from 5,098 mln m3, to 4,114 mln m3.

Figure 2.20
Figure 2.20

Water availability and water losses

Citation: IMF Staff Country Reports 2004, 322; 10.5089/9781451802603.002.A001

Source: SSC
Figure 2.21
Figure 2.21

Access of population to the improved water sources34

Citation: IMF Staff Country Reports 2004, 322; 10.5089/9781451802603.002.A001

Source: HBS, 2002, SSC
Table 2.14.

Quality of drinking water

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Source: Ministry of Health, 2002

Forestry

Due to the fact that Azerbaijan has semi-desert type of plants and limited water sources, a relatively small area is covered by forest. The forest area has been reduced over the last years. According to official statistics, only 11% of the territory of Azerbaijan is covered by the forest. However, it can be assumed that there have been significant changes as a result of uncontrolled use of the forest resources by the population facing with shortage of energy. Unreliable gas supplies in certain territories of the republic have forced people to look for alternative types of fuel.

Obtaining the wood in an unregulated way as alternative energy source has caused serious damage to the forest covering. Figure 2.22 shows that 92.4% of rural population does not have access to the piped gas supply. Totally, 46% of the population in the republic does not have sustainable gas supply.

Figure 2.22
Figure 2.22

Access of population to gas supplies

Citation: IMF Staff Country Reports 2004, 322; 10.5089/9781451802603.002.A001

Source: HBS, 2002, SSC

SPPRED envisages measures to create new forestry areas along the Kur-Araz River and to extend existing forest covering.

As it can be seen from Figure 2.23, the forest rehabilitation work has been implemented on 8 thousands ha of area during the year 2002. However, estimates suggest that large-scale work will lead to an optimum forest covering in the republic (18-20%) in 2025-2030. “The National Program on Forest Rehabilitation and Extension” was adopted in 2002 on the initiative of the Ministry of Ecology and Natural Resources (MENR) of the Republic of Azerbaijan. The program is designed to achieve forest rehabilitation in the regions.

Figure 2.23
Figure 2.23

Re-forestation (Thsd. Ha)

Citation: IMF Staff Country Reports 2004, 322; 10.5089/9781451802603.002.A001

Source: SSC, 2002
Table 2.15.

The scope of work envisaged under the National Program

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Source: Ministry on Ecology and Natural Resources, 2003

Protected Areas36 and Reserves 37

At present there are 20 protected areas in Azerbaijan with a total area of more than 260,000 hectares, the first of which was established in 1923 (the Kara-Yaz-Agstafa), the last in 1993 (Gabala). Protected areas considerably supplement the reserve system providing the preservation of flora and fauna resources of the country and the biodiversity of natural communities.

At present, 14 state reserves with a total area of 192.2 thousand hectares or 2.2% of the total area of the Republic are functioning in Azerbaijan, which cover all the basic natural climatic landscapes and contribute to the preservation of the biodiversity of the Caucasus. It should be noted t hat the functioning of the reserves is made difficult by a number of problems, first of all those connected with the economic situation.

For its geographical location Azerbaijan has various climatic zones with rich biodiversity. Poverty has contributed to the depletion of biodiversity. Unplanned and unregulated hunting and fishery, cutting of the rare types of the trees, collection of the traditional types of plants are the sources of income for poor families in many cases and these activities have a very serious negative impact on biodiversity.

SPPRED envisages measures to create new protected areas (Shahdagh National Park) and reserves (in Ordubad, Shahbuz, Talish and other regions).

Caspian Sea

The Caspian Sea has a great significance for the country. Being a landlocked reservoir, the ecosystem of the Caspian Sea has a great impact on forming the ecosystems of the surrounding territories.

The pollution problems of the Caspian Sea can be divided into following types:

- Chemical pollution brought by the rivers flowing into the Caspian

Industrial discharges to waters were summarized by the Pollution Control, with additional input from Iranian specialists. Sewage and river discharges were estimated based on questionnaires. There are, however, considerable uncertainties in these values. For instance, it is often said that 80% (or 85%) of the hydrocarbons (or total pollution) entering the Caspian Sea comes from the Volga River.

Table 2.16.

Pollution and Dischanges via Rivers

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Source: United Nations Environment Programme (UNEP), 2002

- Offshore oil industry

The Caspian Regional Thematic Center for Pollution Control in Baku conducted studies of the pollution loads of the major industries and activities in the region. The results have been supported by further rapid assessment methods in all five Caspian littoral states.

- Water level rising in the rivers

Table 2.17.

Estimated Pollution Discharges into the Caspian Sea from Industries

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Source: UNEP, 2002

The most probable reason for the decrease in the Caspian sea-level is considered to be the change of the fresh water flow into the Caspian, of which about 75% (80.3% of the river flow) is from the Volga River. As, in the beginning of the current century, the construction of flow regulating dams was started (8-on the Volga river, 3-on the Ama river, 1-on the Ural river, 3-on the Kur river) and the “irreversible” losses of water for agricultural and industrial purposes increased (from 1950 to 1992 water consumption made up about 900 km2), all these were regarded as the reasons for the sea-level decline.

uA01fig02
Source: Transboundary diagnostic Analysts for ths Caspian Sea. The Caspian Environment Programme, 2002

The pollution problems of the Caspian are being tackled through the Caspian Environment Programme (CEP). This is a regional programme developed for and by the five Caspian Littoral States, Azerbaijan, Iran, Kazakhstan, Russia and Turkmenistan, aiming to halt the deterioration of environmental conditions of the Caspian Sea and to promote sustainable development in the area. A major outcome of the CEP will be the action plan to be adopted by the five states bordering the Sea. The plan will be developed through the agreed technical analysis (Transboundary Diagnostic Analysis -TDA) which will lead to the Strategic Action Plan (SAP). Contributions to the SAP by each state will be defined in the National Plans.

The specific goal of the present National Caspian Action Plan is to improve the ecological status in Azerbaijani part of the Caspian Sea and adjacent littoral territories, to reduce its negative impact on the health of the population, to maintain the life support functions of hydrosphere and biosphere and effective participation of Azerbaijan in the regional and international nature-conservative activity.

Table 2.18.

Sources of the Caspian Sea pollution (all countries)

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Source: UNEP, 2002

Environmental Sustainability and the MDGs

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Carbon dioxide emissions (per capita) and consumption of ozone-depleting chlorofluorocarbons.

One of the problems in Azerbaijan is the weak institutional capacity for monitoring environmental problems, and therefore for formulating and implementing policies aimed at promoting environmental sustainability. There is a need for cross-sectoral dialogue in designing environmental policies, and in developing an effective regulatory framework.

Attempts are being made to protect the land area covered by forest, and to maintain biological diversity. However, the regulatory systems will have to be improved and local communities involved. Illegal logging has to be stopped, but accompanied by measures to ensure access to alternative fuel for local communities.

The indicator of land acreage covered by forest may not be appropriate for Azerbaijan, since it does not capture problems with decline in forest quality, including reduced yields and reduced species mix. For Azerbaijan, it may be appropriate to use an indicator concerning land salinity.

Azerbaijan inherited the Soviet system of inefficient use of energy. Energy subsidies to some extent still encourage inefficiencies in use of energy by not penalizing wasteful use. On the other hand, households in rural areas have inadequate access to electricity39. Carbon dioxide emissions40 are declining. The carbon indicator is linked to policies to reduce greenhouse gases, and reductions will lead to lower incidence of respiratory and cardiovascular illnesses.

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Circa 84% of the urban population has access to piped drinking water, and 11% of the rural population. This huge difference in access between urban and rural areas has to be addressed. However, the problem in Azerbaijan is not so much access to improved water sources, although there may be some work to be done on this in rural areas. The problem is more ensuring the quality of the water. Drinking water should meet basic biological and chemical standards. The Ministry of Health monitors the quality of drinking water, but lacks modern equipment to carry out reliable monitoring. Infrastructure needs repair and investment.

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With regard to improved sanitation, the problem is not so much access, but the state of repair of the current sewage systems. Setting a target for Azerbaijan based on access alone is inappropriate. Sewage water can leak and pollute water resources.

The definition of slum is not clear, and the extent of the problem in Azerbaijan is therefore difficult to define. However, it may be worth considering setting a shorter term target for improving the housing conditions of those sections of the IDP population which are still living in unsanitary conditions.

2.7 Refugees and IDPs

Introduction

As it was stated in the SPPRED, currently there are circa 1 mln. refugees and IDPs in the country, which makes up approximately 12% of the country’s overall population. 15 years passed since the IDP problem emerged; children have been born, have grown up in difficult situations, new families formed. IDPs on the whole still live in concentrated groups, whereas refugees are more dispersed, and have been integrated into the local population. The IDP population has concentrated in areas near to the occupied territories and about one third are living in Baku. Many IDPs are still living in special camps or in temporary accommodation such as hostels or unfinished buildings in Baku and other big cities.

The political situation surrounding the problems of IDP’s and refugees has not been yet resolved. The main SPPRED objective of “returning the IDPs to their permanent place of residence” could not therefore be achieved. In the meantime, in order to improve the living conditions of this group, the government, in partnership with donor organizations, is accommodating some of the families in newly constructed camps and providing them with plots of land. The state is continuing to resettle IDP households, especially those who are living in the most appalling conditions. New houses for IDP families are being made available in Shamkir, Aghstafa, Yevlakh and other regions within the framework of SPPRED. Some are provided with plots of land, and repairs are being carried out in some of the living places where the IDPs accommodated.

Nevertheless, according to official statistics, the majority of the IDPs are still living in unsuitable and below standard conditions especially from a sanitary and health point of view. Unemployment amongst IDP’s remains high.

Although one of the six main strategic goals of the SPPRED program is to “improve the living conditions and opportunities of the refugee and IDP population”, there are limited data sources from which to monitor implementation of this overall aim. The State Committee for Refugees and IDPs (SCRIDP) collects administrative data on the numbers and living places of this section of the population, and also on the type of accommodation in which the iDp households live. There is very little statistical data available on the quality of their accommodation or their general living standards. There are no regular surveys which allow us to monitor the living standards of refugees and IDPs; surveys that allow looking at the differences in living standards within this group, in order to target support.

There is also no satisfactory regular source of information which allows us to look at the differences in income poverty between IDPs/refugees, and the rest of the population. However, a one-off survey of IDPs/ Refugees was carried out in 2002 which allows some comparison of the living standards of this group and the rest of the population, and the results of this survey are discussed in the sections below41. The other source of data is the SCC’s HBS. However, the refugee/ IDP population is represented in this survey in proportion to their representation in the total population, i.e. less than 8%. This makes it a small sample size, which is not suitable for looking at differentials within the group. Apart from these sources, there have been smaller one-off studies of sections of the IDP/ refugee population, which give, however, a somewhat fragmented picture of their situation. SPPRED envisaged the implementation of an annual survey on the IDP/ Refugee population, but so far there have been no steps taken towards implementing this measure.

Housing and Living conditions

The majority of IDPs are still living in unsatisfactory accommodation with insufficient access to sanitation facilities. According to official statistics, one quarter of the IDP population has settled with relatives. At the same time the remainder is living in temporary accommodation, such as tent camps, public buildings, etc. According to the results of a survey conducted by the World Food Program, up to 2/3 of the households of the IDPs in the rural areas are living in one-room apartments. Another survey conducted with support of the WB has revealed that the majority of the IDPs in the cities and rural areas are living in one-room apartments, 18% of them do not have direct access to water (WB/UNDP 2002).

The state is continuing to resettle the IDPs especially those who are living in places not suitable for habitation. There has been a reduction of people living in camps and railway carriages as can be seen from the table below.

Table 2.19.

Housing of IDPs

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Source: State Committee for Refugees and IDPs, 2003

According to the results of the IDP Survey conducted by the WB in 2002, approximately 47% of the IDPs are unemployed (ILO definition). The collected information shows that approximately 33% of the refugees and IDPs were mainly engaged in agricultural activities before they changed their living places. According to the AIDPS results, 15% of the IDPs have access to land. The Government has allocated temporary plots of land for the use of IDPs and it is planned to continue this activity during the implementation period of the SPPRED.

Employment

The level of employment among refugees and IDPs is low. According to a survey carried out in 2001, two thirds of the IDP population is unemployed42. The AIDPS estimates that 47% of IDPs/ refugees were unemployed in 2002 -they were 2.6 times more likely to be unemployed compared to the local population. Although there is no official information, it is generally assumed that IDPs are active in the informal sector, seasonal activity and street trade; i.e. activities which may not be captured by survey questions on employment.

According to the present information given by the SCRIDP, out of 292,771 persons, up to 30% (92,869) of the IDPs are working in the formal sector. AIDPS results suggest that most IDPs are engaged in agricultural activities. However, they are known to have limited access to land. Whereas 94% of the population living in rural areas has access to land, the figure for IDPs is 35%.

Table 2.20 shows that there is a difference between the sources and structure of household income of the local population and IDPs/refugees. The Table highlights the fact that the percentage of income from agriculture among refugees and IDPs is 2.5 times less in comparison with local population. The main sources of income of IDPs, as shown, are privileges and state benefits and the main source of income is not from employment.

Table 2.20.

Structure of Income: Refugees, IDPs, and Resident Population

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Source: HBS, 2002, SSC

In order to resolve the employment problems of IDPs, SPPRED has adopted as priority measures the extension of small loans and encouragement of small entrepreneurship. Provision of soft loans/micro credit for IDPs dealing with agriculture and establishment of small production units carpet-making and weaving are envisaged.

Nutrition and Health

Poverty and instability has had a negative impact on the health of IDPs. Psychological stresses, incomplete and unsatisfactory nutrition, limited access to the health services meant that the incidence of disease has been higher among the IDPs and that disease is more likely to spread among this section of the population. According to the information collected by SCRIDP, underweight among refugees and IDPs is two times more than the rest population. 23.5% of the children under 5-year old of the IDPs are suffering from diphtheria.

People with disabilities among the IDPs are 30 per 1,000 persons43. Chronic diseases are 152.8 per 1,000 persons of the population. This indicator is 199.6 persons among the IDPs.

Unsatisfactory infrastructure in IDP settlements also increases the risk of disease. In 56% of the temporary settlements built for the IDPs, drinking water is taken from artesian wells. 38% of the population uses the river and channels as their source of water.

Education

The level of literacy of IDPs does not considerably differ from other social groups of population. (The level of literacy among refugees and IDPs is 97.1%.44) But observations give us grounds to say that the refugee and IDP families living in unsuitable condition have problems with access to education. According to the survey carried out in 2001, only 62.4% of the school age children attended schools. 21.8% of them did not go to school at all45.

Table 2.21.

Education levels of Refugee/ IDP population

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Source: SCRIDP, 2002

Lack of school facilities in the areas inhabited by refugees and IDPs means that it is difficult for children to attend. In some areas, schools operate on a 3-shift system. 94.8% of refugee and IDP families have difficulties in obtaining school materials46. The number of the teenagers over 16 with incomplete secondary education is 2 times more (37.8%) than the national level. (SCRIDP, 2002). Enrolment rates for IDPs have dropped due to the difficulties in guaranteeing them with school buildings. Even when these are available, they are often poorly heated and equipped.

As IDPs represent one of the most vulnerable groups in SPPRED, a special package of measures has been prepared to improve their involvement in education. These include the construction of secondary schools in the new settlements and improvement of physical and technical infrastructure in the existing ones are envisaged.

2.8 Social Protection47.

Background

The aim of social protection is the protection of individuals and households against risks and lack of security. All individuals are confronted with certain risks, and risks come in many forms. The transition period has placed particular demands on Azerbaijan’s social protection system. Firstly because it has had to address the economic hardship and disruption faced by most of the population especially in the initial transition period, and secondly because the previous system of social protection was designed during the Soviet period and has to go through a series of complex reforms in order to function effectively in the new economic setting. SPPRED identifies as one of its main strategic objectives “the reform of the existing system of social protection to give more effective protection to the vulnerable”.

Pensions

The average monthly pension in 2002 was 88,493 AZM. This compares to the average monthly wage of 315,406 AZM and average per capita income of 219,695 AZM.

Table 2.22 above shows that average nominal pensions, wages, and per capita income amounts increased, but that real pensions and per capita income decreased in 2000 in comparison with 1999. The situation improved after 2000 (see Figure 2.24).

Table 2.22.

Average nominal and real pensions, wages and per capita income levels 1999-2003

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Source: SSC, 2003
Figure 2.24
Figure 2.24

Growth rate of real pensions, wages and income per capita

(per cent)

Citation: IMF Staff Country Reports 2004, 322; 10.5089/9781451802603.002.A001

Source: SSC

Using data from the SSC, we can look at the same information for different categories of pensions. As Figure 2.25 shows, both nominal and real pensions have increased in the period 2001-2002. Nominal pensions increased by 120%; old age pensions48 by 116% times; disability pensions49 by 135%; pensions for loss of head of household50 by 137%; service pensions51 by 119%; and social pensions52 by 109%. The increase has influenced the total amount of pensions and welfare payments. The additional welfare payments to unemployed pensioners increased 1.6 times.

Figure 2.25
Figure 2.25

Nominal and real growth by different categories of pensions

(per cent)

Citation: IMF Staff Country Reports 2004, 322; 10.5089/9781451802603.002.A001

Source: SSC

Despite the low levels of pensions, the HBS results for 2002 suggest that only 4.9% of all pensioners were poor. However, this result appears to be explained by the fact that most pensioners live with larger families, and benefit from the support of other household members. But if we look at the HBS results for households (rather than individuals), we find that almost 40% of all households can be considered poor (i.e. per capita household expenditure is less than 175,000 AZM); and of these (poor) households, 41% are headed by a pensioner. This suggests that when pensioners live alone (when they are head of households), or do not have support from other adult family members, current pension levels in many cases do not protect them from poverty.

Social Assistance

The main social assistance allowances are one-off benefits for child birth, benefits for children under 3, benefits for children under 16 years, and benefits for guardianship. There are in fact a total of 35 separate benefits, and one of the aims of social assistance reform is to gradually reduce this number and rationalize the administration of the benefits, as well as targeting them to the poorest sections of the population. The current wide range of benefits are mainly “categorical”, i.e. they are paid to different categories of the population (eg. invalids), rather than being targeted on those who are really in need. This means that the limited state funds which are available for social benefits are not being efficiently utilized.

The State Social Protection Fund’s (SSPF) budget comes from two sources: social insurance contributions and transfers from the state budget. In 2003, 57.5% of the SSPF’s budget came from social insurance contributions, and 42.5% from the state budget. The SSPF’s 2003 budget included 711.24 billion AZM for benefits, equal to 39.3% of the total SSPF budget. State expenditure on social protection (through the SSPF) amounted to 768 bln mantas, of which 586 billion was spent on social assistance benefits; 107 billion AZM for subsidies for transport, communal and other kinds of services, and 75 billion for social pensions.

Table 2.23.

SSPF Budget, 2003

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Source: SSPF

Child benefits for children from low income families are especially important. Until August 2003, Social Protection Centers provided child benefits for 1,320,172 children from 576,131 families. A further 302,312 child benefits were paid through the parents’ place of work. In August 2003, a Presidential Decree ruled that every beneficiary should receive their benefit from a SPC. The government spent circa 14 billion AZM per month on child benefits in 2003, meaning that the approximate annual expenditure on these benefits was 168 billion mantas. This amounts to 9.3% of the total SSPF’s expenditure and is equal to 23.6% of the total amount paid in benefits from the SSPF; and 21.9% of the state budget’s social protection expenditure.

Table 2.24.

Number of children from low - income families receiving child benefits in 2003

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Source. MLSP