Abstract
This Article IV Consultation reports on policies of the Republic of Azerbaijan. These policies contain inflation and measures to strengthen the resilience of the banking system to promote the development of the financial sector. Non-oil GDP continued to expand rapidly, pushed by large increases in public expenditure, including wages and pensions. The authorities intend to continue with their expansionary fiscal plans in 2008, in line with their strategy to pursue fast improvements in living standards and infrastructure to set the basis for long-term non-oil growth.
May 23, 2008
1. This statement summarizes information that has become available since the Staff Report on the Republic of Azerbaijan was circulated to the Executive Board on May 8, 2008. The new information points to heightened risk for further rise in the already high inflation rate, but does not change the thrust of the staff appraisal.
2. Inflation has accelerated since the beginning of the year. The 12-month inflation rate rose to 21.4 percent in April from 15.2 percent in January, with food inflation surging to 29.6 percent from 19.4 percent.
3. On May 7, 2008, the President of the Republic of Azerbaijan signed into law the supplementary budget of the central government for 2008. The revised budget indicates a much larger fiscal expansion than the one described in the baseline scenario of the staff report, which reflected preliminary information on government policy intentions at the time of the mission. The authorities justified the significant budget expansion on account of higher than previously expected oil revenue.1 The revised budget has significantly increased the domestically financed investment expenditure, quoting higher investment costs because of rising commodity and building material prices, and the need to accelerate the execution of investment projects to support non-oil GDP growth. Allocations for wages, pensions and social transfers have also been augmented to counter the impact of inflation on real incomes.
4. Staff estimates that the 2008 supplementary budget would entail an increase in consolidated government expenditure of 12.7 percentage points of non-oil GDP, with respect to the staff report projections (Tables 1, 2 and 3). Non-oil revenue is now projected to be 1.7 percentage point of non-oil GDP higher, on account of higher inflation and growth. if fully executed, the revised budget would result in a widening of the non-oil primary deficit to 50 percent of non-oil GDP, from 32 percent in 2007; the staff report projected a non-oil primary deficit of 39 percent of non-oil GDP for 2008. The overall fiscal surplus would be lower than previously projected by about 1.9 billion manat (5 percent of total GDP), leading to less accumulation of oil fund assets.
Azerbaijan: Selected Economic and Financial Indicators, 2005–08
Includes oil and gas transportation.
Defined as gross domestic demand (excluding oil sector-related imports) divided by average broad money.
The historical data include the statistical discrepancy.
Includes the central governments’s foreign exchange deposits managed by the Oil Fund.
Includes the projected macroeconomic impact of the 2008 supplementary budget enacted on May 8, 2008.
Azerbaijan: Selected Economic and Financial Indicators, 2005–08
| Prel. | SM/08/140 | Rev. Proj.5/ | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2005 | 2006 | 2007 | 2008 | ||||||||
| (Annual percentage change, unless otherwise specified) | |||||||||||
| National income | |||||||||||
| GDP at current prices | 46.8 | 49.7 | 43.4 | 49.5 | 51.3 | ||||||
| GDP at constant prices | 24.3 | 30.5 | 23.4 | 18.6 | 19.1 | ||||||
| Oil GDP | 65.4 | 62.0 | 37.3 | 27.7 | 27.7 | ||||||
| Non-oil GDP 1/ | 8.4 | 11.9 | 11.5 | 9.0 | 10.0 | ||||||
| Implicit GDP deflator | 18.1 | 14.7 | 16.2 | 26.1 | 27.1 | ||||||
| Consumer price index (end-period) | 5.5 | 11.4 | 19.5 | 22.0 | 26.0 | ||||||
| Consumer price index (period average) | 9.7 | 8.4 | 16.6 | 19.6 | 22.3 | ||||||
| Consolidated central government finance | |||||||||||
| Total revenue | 36.9 | 67.5 | 51.5 | 178.8 | 183.7 | ||||||
| Of which: non-oil revenue | 34.9 | 34.5 | 43.2 | 27.6 | 38.8 | ||||||
| Total expenditure | 28.7 | 80.9 | 43.3 | 42.4 | 72.8 | ||||||
| Of which: current expenditure | 22.8 | 50.9 | 33.5 | 34.8 | 53.9 | ||||||
| investment expenditure | 59.9 | 203.6 | 63.1 | 55.0 | 104.3 | ||||||
| Money and credit | |||||||||||
| Net foreign assets | 7.5 | 89.3 | 46.9 | 75.0 | 105.6 | ||||||
| Net domestic assets | 47.9 | 82.7 | 106.4 | 65.2 | 84.9 | ||||||
| Credit to the economy | 53.0 | 63.6 | 96.5 | 55.0 | 70.0 | ||||||
| Manat base money | 7.5 | 132.6 | 101.4 | 68.3 | 94.3 | ||||||
| Broad money | 22.1 | 86.4 | 72.4 | 70.0 | 95.0 | ||||||
| Foreign currency deposits ratio to broad money | 56.9 | 37.9 | 25.4 | 17.9 | 17.9 | ||||||
| Velocity of broad money (M3) 2/ | 5.2 | 4.8 | 3.5 | 2.8 | 2.9 | ||||||
| External sector (in U.S. dollars) | |||||||||||
| Exports f.o.b. | 104.4 | 70.1 | 63.1 | 57.3 | 57.3 | ||||||
| Of which: oil sector | 113.0 | 75.4 | 66.5 | 59.7 | 59.7 | ||||||
| Imports f.o.b. | 21.4 | 21.1 | 14.1 | 30.4 | 51.1 | ||||||
| Of which: oil sector | 18.7 | -9.1 | -25.8 | -25.5 | -25.5 | ||||||
| Export volumes | 47.8 | 41.0 | 47.1 | 19.5 | 19.5 | ||||||
| Import volumes | 15.6 | 9.8 | 2.5 | 22.1 | 41.5 | ||||||
| Terms of trade | 17.0 | 11.6 | 4.3 | 23.3 | 23.3 | ||||||
| Real effective exchange rate (- deprec.) | 6.3 | 8.7 | 8.8 | … | … | ||||||
| (In percent of GDP, unless otherwise speciified) | |||||||||||
| Gross investment | 41.5 | 29.9 | 20.4 | 16.3 | 18.4 | ||||||
| Consolidated government | 4.1 | 8.6 | 10.3 | 10.6 | 13.9 | ||||||
| Private sector | 37.4 | 21.2 | 10.2 | 5.6 | 4.5 | ||||||
| Of which: oil sector | 17.6 | 7.8 | 3.7 | 1.5 | 1.5 | ||||||
| Gross national savings | 42.8 | 47.6 | 49.2 | 55.8 | 54.7 | ||||||
| Consolidated government | 7.0 | 8.8 | 12.7 | 39.7 | 38.0 | ||||||
| Private sector 3/ | 35.8 | 38.7 | 36.5 | 16.1 | 16.7 | ||||||
| Consolidated central government finance | |||||||||||
| Overall fiscal balance | 2.6 | -0.2 | 2.4 | 29.1 | 24.2 | ||||||
| Non-oil primary balance, in percent of non-oil GDP | -12.6 | -31.1 | -32.1 | -39.0 | -50.0 | ||||||
| Implicit energy subsidies, in percent of non-oil GDP | 23.5 | 19.8 | 14.8 | 15.9 | 15.4 | ||||||
| External sector | |||||||||||
| Current account (- deficit) | 1.3 | 17.7 | 28.8 | 39.5 | 36.3 | ||||||
| Foreign direct investment (net) | 3.5 | -6.2 | -16.6 | -4.1 | -4.1 | ||||||
| Public and publicly guaranteed external debt | 12.5 | 9.4 | 8.1 | 7.5 | 7.3 | ||||||
| Memorandum items: | |||||||||||
| Nominal GDP (in millions of manats) | 12,523 | 18,746 | 26,884 | 40,204 | 40,678 | ||||||
| Nominal non-oil GDP (in millions of manats) 1/ | 7,002 | 8,655 | 11,131 | 14,462 | 14,936 | ||||||
| Population (mid-year, in millions) | 8.4 | 8.5 | 8.6 | 8.6 | 8.6 | ||||||
| Nominal GDP per capita (in U.S. dollars) | 1,574 | 2,469 | 3,663 | 5,689 | 5,756 | ||||||
| Gross official international reserves (in millions of U.S. dollars) | 1,178 | 2,500 | 4,273 | 7,410 | 8,528 | ||||||
| Oil Fund assets (in millions of U.S. dollars) 4/ | 1,394 | 1,869 | 3,019 | 18,241 | 15,938 | ||||||
| Exchange rate (manat/dollar, end-of-period) | 0.919 | 0.871 | 0.845 | … | … | ||||||
Includes oil and gas transportation.
Defined as gross domestic demand (excluding oil sector-related imports) divided by average broad money.
The historical data include the statistical discrepancy.
Includes the central governments’s foreign exchange deposits managed by the Oil Fund.
Includes the projected macroeconomic impact of the 2008 supplementary budget enacted on May 8, 2008.
Azerbaijan: Selected Economic and Financial Indicators, 2005–08
| Prel. | SM/08/140 | Rev. Proj.5/ | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2005 | 2006 | 2007 | 2008 | ||||||||
| (Annual percentage change, unless otherwise specified) | |||||||||||
| National income | |||||||||||
| GDP at current prices | 46.8 | 49.7 | 43.4 | 49.5 | 51.3 | ||||||
| GDP at constant prices | 24.3 | 30.5 | 23.4 | 18.6 | 19.1 | ||||||
| Oil GDP | 65.4 | 62.0 | 37.3 | 27.7 | 27.7 | ||||||
| Non-oil GDP 1/ | 8.4 | 11.9 | 11.5 | 9.0 | 10.0 | ||||||
| Implicit GDP deflator | 18.1 | 14.7 | 16.2 | 26.1 | 27.1 | ||||||
| Consumer price index (end-period) | 5.5 | 11.4 | 19.5 | 22.0 | 26.0 | ||||||
| Consumer price index (period average) | 9.7 | 8.4 | 16.6 | 19.6 | 22.3 | ||||||
| Consolidated central government finance | |||||||||||
| Total revenue | 36.9 | 67.5 | 51.5 | 178.8 | 183.7 | ||||||
| Of which: non-oil revenue | 34.9 | 34.5 | 43.2 | 27.6 | 38.8 | ||||||
| Total expenditure | 28.7 | 80.9 | 43.3 | 42.4 | 72.8 | ||||||
| Of which: current expenditure | 22.8 | 50.9 | 33.5 | 34.8 | 53.9 | ||||||
| investment expenditure | 59.9 | 203.6 | 63.1 | 55.0 | 104.3 | ||||||
| Money and credit | |||||||||||
| Net foreign assets | 7.5 | 89.3 | 46.9 | 75.0 | 105.6 | ||||||
| Net domestic assets | 47.9 | 82.7 | 106.4 | 65.2 | 84.9 | ||||||
| Credit to the economy | 53.0 | 63.6 | 96.5 | 55.0 | 70.0 | ||||||
| Manat base money | 7.5 | 132.6 | 101.4 | 68.3 | 94.3 | ||||||
| Broad money | 22.1 | 86.4 | 72.4 | 70.0 | 95.0 | ||||||
| Foreign currency deposits ratio to broad money | 56.9 | 37.9 | 25.4 | 17.9 | 17.9 | ||||||
| Velocity of broad money (M3) 2/ | 5.2 | 4.8 | 3.5 | 2.8 | 2.9 | ||||||
| External sector (in U.S. dollars) | |||||||||||
| Exports f.o.b. | 104.4 | 70.1 | 63.1 | 57.3 | 57.3 | ||||||
| Of which: oil sector | 113.0 | 75.4 | 66.5 | 59.7 | 59.7 | ||||||
| Imports f.o.b. | 21.4 | 21.1 | 14.1 | 30.4 | 51.1 | ||||||
| Of which: oil sector | 18.7 | -9.1 | -25.8 | -25.5 | -25.5 | ||||||
| Export volumes | 47.8 | 41.0 | 47.1 | 19.5 | 19.5 | ||||||
| Import volumes | 15.6 | 9.8 | 2.5 | 22.1 | 41.5 | ||||||
| Terms of trade | 17.0 | 11.6 | 4.3 | 23.3 | 23.3 | ||||||
| Real effective exchange rate (- deprec.) | 6.3 | 8.7 | 8.8 | … | … | ||||||
| (In percent of GDP, unless otherwise speciified) | |||||||||||
| Gross investment | 41.5 | 29.9 | 20.4 | 16.3 | 18.4 | ||||||
| Consolidated government | 4.1 | 8.6 | 10.3 | 10.6 | 13.9 | ||||||
| Private sector | 37.4 | 21.2 | 10.2 | 5.6 | 4.5 | ||||||
| Of which: oil sector | 17.6 | 7.8 | 3.7 | 1.5 | 1.5 | ||||||
| Gross national savings | 42.8 | 47.6 | 49.2 | 55.8 | 54.7 | ||||||
| Consolidated government | 7.0 | 8.8 | 12.7 | 39.7 | 38.0 | ||||||
| Private sector 3/ | 35.8 | 38.7 | 36.5 | 16.1 | 16.7 | ||||||
| Consolidated central government finance | |||||||||||
| Overall fiscal balance | 2.6 | -0.2 | 2.4 | 29.1 | 24.2 | ||||||
| Non-oil primary balance, in percent of non-oil GDP | -12.6 | -31.1 | -32.1 | -39.0 | -50.0 | ||||||
| Implicit energy subsidies, in percent of non-oil GDP | 23.5 | 19.8 | 14.8 | 15.9 | 15.4 | ||||||
| External sector | |||||||||||
| Current account (- deficit) | 1.3 | 17.7 | 28.8 | 39.5 | 36.3 | ||||||
| Foreign direct investment (net) | 3.5 | -6.2 | -16.6 | -4.1 | -4.1 | ||||||
| Public and publicly guaranteed external debt | 12.5 | 9.4 | 8.1 | 7.5 | 7.3 | ||||||
| Memorandum items: | |||||||||||
| Nominal GDP (in millions of manats) | 12,523 | 18,746 | 26,884 | 40,204 | 40,678 | ||||||
| Nominal non-oil GDP (in millions of manats) 1/ | 7,002 | 8,655 | 11,131 | 14,462 | 14,936 | ||||||
| Population (mid-year, in millions) | 8.4 | 8.5 | 8.6 | 8.6 | 8.6 | ||||||
| Nominal GDP per capita (in U.S. dollars) | 1,574 | 2,469 | 3,663 | 5,689 | 5,756 | ||||||
| Gross official international reserves (in millions of U.S. dollars) | 1,178 | 2,500 | 4,273 | 7,410 | 8,528 | ||||||
| Oil Fund assets (in millions of U.S. dollars) 4/ | 1,394 | 1,869 | 3,019 | 18,241 | 15,938 | ||||||
| Exchange rate (manat/dollar, end-of-period) | 0.919 | 0.871 | 0.845 | … | … | ||||||
Includes oil and gas transportation.
Defined as gross domestic demand (excluding oil sector-related imports) divided by average broad money.
The historical data include the statistical discrepancy.
Includes the central governments’s foreign exchange deposits managed by the Oil Fund.
Includes the projected macroeconomic impact of the 2008 supplementary budget enacted on May 8, 2008.
Azerbaijan: Consolidated Central Government Operations, 2005–08
(In millions of manats)
Includes contingent revenues accrued on the “deposit account” of budgetary organizations.
Includes profit oil, acreage fees, and income earned on Oil Fund assets. Oil bonuses also enter in the Oil Fund, but these are treated as a financing item.
Includes changes in Oil Fund assets.
Includes SOCAR tax credits for energy subsidies.
Includes grants, VAT and excise taxes on oil and gas, and tax withholding on the Azerbaijan International Operating Companys’s subcontractors.
Fund staff estimates.
Fund staff projections reflecting the impact of the 2008 supplementary budget enacted on May 8, 2008.
Azerbaijan: Consolidated Central Government Operations, 2005–08
(In millions of manats)
| Prel. | SM/08/140 | Rev. Proj. 7/ | |||||||
|---|---|---|---|---|---|---|---|---|---|
| 2005 | 2006 | 2007 | 2008 | ||||||
| Total revenue and grants | 3,143 | 5,253 | 7,949 | 22,162 | 22,547 | ||||
| Total revenue | 3,132 | 5,248 | 7,949 | 22,162 | 22,547 | ||||
| Tax revenue | 1,902 | 3,341 | 5,634 | 6,548 | 6,961 | ||||
| Income taxes | 673 | 1,768 | 3,046 | 3,111 | 3,326 | ||||
| Individual income tax | 317 | 407 | 589 | 750 | 795 | ||||
| Enterprise profits tax | 355 | 1,361 | 2,458 | 2,361 | 2,531 | ||||
| Social security contributions | 198 | 294 | 551 | 572 | 611 | ||||
| Value added tax (VAT) | 600 | 738 | 1,179 | 1,725 | 1,885 | ||||
| Domestic | 346 | 386 | 644 | 980 | 1,130 | ||||
| Imports | 254 | 351 | 535 | 745 | 755 | ||||
| Excise taxes | 141 | 187 | 403 | 450 | 450 | ||||
| Taxes on international trade | 205 | 239 | 287 | 457 | 457 | ||||
| Other taxes | 85 | 115 | 167 | 233 | 233 | ||||
| Nontax revenue 1/ | 938 | 1,499 | 2,152 | 15,614 | 15,585 | ||||
| Of which: Oil Fund revenues 2/ | 596 | 984 | 1,813 | 15,233 | 15,204 | ||||
| Tax credits for SOCAR energy subsidies | 292 | 408 | 163 | 0 | 0 | ||||
| Total grants (current) | 11 | 5 | 0 | 0 | 0 | ||||
| Total expenditure | 2,839 | 5,135 | 7,356 | 10,472 | 12,712 | ||||
| Current expenditure | 2,281 | 3,442 | 4,595 | 6,192 | 7,070 | ||||
| Primary current expenditure | 1,973 | 3,021 | 4,402 | 6,081 | 6,960 | ||||
| Wages and salaries | 580 | 745 | 1,086 | 1,521 | 1,810 | ||||
| Goods and services | 716 | 1,285 | 1,854 | 2,511 | 3,063 | ||||
| Transfers | 640 | 884 | 1,297 | 1,851 | 1,884 | ||||
| Of which: social protection fund | 495 | 566 | 1,038 | 1,409 | 1,406 | ||||
| Subsidies | 28 | 41 | 161 | 188 | 193 | ||||
| Oil Fund (operating expenditures) | 2 | 1 | 4 | 10 | 10 | ||||
| Other | 7 | 66 | 0 | 0 | 0 | ||||
| SOCAR energy-related subsidies | 292 | 408 | 163 | 0 | 0 | ||||
| Interest | 16 | 13 | 30 | 111 | 110 | ||||
| Current balance (-, deficit) | 862 | 1,811 | 3,354 | 15,970 | 15,477 | ||||
| Investment expenditure and net lending | 558 | 1,693 | 2,761 | 4,280 | 5,642 | ||||
| Domestically-financed | 438 | 1,427 | 2,613 | 3,754 | 5,116 | ||||
| Foreign-financed | 120 | 266 | 148 | 526 | 526 | ||||
| Statistical discrepancy | -17 | 155 | -54 | 0 | 0 | ||||
| Non-oil primary balance | -884 | -2,691 | -3,571 | -5,637 | -7,465 | ||||
| Consolidated government balance, cash basis | 321 | -37 | 646 | 11,690 | 9,835 | ||||
| Excluding foreign project loans | 441 | 229 | 795 | 12,216 | 10,361 | ||||
| Financing | -321 | 37 | -646 | -11,690 | -9,835 | ||||
| Domestic (net) 3/ | -436 | -223 | -830 | -12,390 | -10,494 | ||||
| External (net) | 115 | 260 | 183 | 700 | 659 | ||||
| Memorandum items: | |||||||||
| Oil revenue 4/ | 1,221 | 2,667 | 4,247 | 17,438 | 17,410 | ||||
| Non-oil revenue 5/ | 1,922 | 2,585 | 3,701 | 4,724 | 5,137 | ||||
| Implicit subsidies 6/ | 1,647 | 1,710 | 1,647 | 2,295 | 2,295 | ||||
Includes contingent revenues accrued on the “deposit account” of budgetary organizations.
Includes profit oil, acreage fees, and income earned on Oil Fund assets. Oil bonuses also enter in the Oil Fund, but these are treated as a financing item.
Includes changes in Oil Fund assets.
Includes SOCAR tax credits for energy subsidies.
Includes grants, VAT and excise taxes on oil and gas, and tax withholding on the Azerbaijan International Operating Companys’s subcontractors.
Fund staff estimates.
Fund staff projections reflecting the impact of the 2008 supplementary budget enacted on May 8, 2008.
Azerbaijan: Consolidated Central Government Operations, 2005–08
(In millions of manats)
| Prel. | SM/08/140 | Rev. Proj. 7/ | |||||||
|---|---|---|---|---|---|---|---|---|---|
| 2005 | 2006 | 2007 | 2008 | ||||||
| Total revenue and grants | 3,143 | 5,253 | 7,949 | 22,162 | 22,547 | ||||
| Total revenue | 3,132 | 5,248 | 7,949 | 22,162 | 22,547 | ||||
| Tax revenue | 1,902 | 3,341 | 5,634 | 6,548 | 6,961 | ||||
| Income taxes | 673 | 1,768 | 3,046 | 3,111 | 3,326 | ||||
| Individual income tax | 317 | 407 | 589 | 750 | 795 | ||||
| Enterprise profits tax | 355 | 1,361 | 2,458 | 2,361 | 2,531 | ||||
| Social security contributions | 198 | 294 | 551 | 572 | 611 | ||||
| Value added tax (VAT) | 600 | 738 | 1,179 | 1,725 | 1,885 | ||||
| Domestic | 346 | 386 | 644 | 980 | 1,130 | ||||
| Imports | 254 | 351 | 535 | 745 | 755 | ||||
| Excise taxes | 141 | 187 | 403 | 450 | 450 | ||||
| Taxes on international trade | 205 | 239 | 287 | 457 | 457 | ||||
| Other taxes | 85 | 115 | 167 | 233 | 233 | ||||
| Nontax revenue 1/ | 938 | 1,499 | 2,152 | 15,614 | 15,585 | ||||
| Of which: Oil Fund revenues 2/ | 596 | 984 | 1,813 | 15,233 | 15,204 | ||||
| Tax credits for SOCAR energy subsidies | 292 | 408 | 163 | 0 | 0 | ||||
| Total grants (current) | 11 | 5 | 0 | 0 | 0 | ||||
| Total expenditure | 2,839 | 5,135 | 7,356 | 10,472 | 12,712 | ||||
| Current expenditure | 2,281 | 3,442 | 4,595 | 6,192 | 7,070 | ||||
| Primary current expenditure | 1,973 | 3,021 | 4,402 | 6,081 | 6,960 | ||||
| Wages and salaries | 580 | 745 | 1,086 | 1,521 | 1,810 | ||||
| Goods and services | 716 | 1,285 | 1,854 | 2,511 | 3,063 | ||||
| Transfers | 640 | 884 | 1,297 | 1,851 | 1,884 | ||||
| Of which: social protection fund | 495 | 566 | 1,038 | 1,409 | 1,406 | ||||
| Subsidies | 28 | 41 | 161 | 188 | 193 | ||||
| Oil Fund (operating expenditures) | 2 | 1 | 4 | 10 | 10 | ||||
| Other | 7 | 66 | 0 | 0 | 0 | ||||
| SOCAR energy-related subsidies | 292 | 408 | 163 | 0 | 0 | ||||
| Interest | 16 | 13 | 30 | 111 | 110 | ||||
| Current balance (-, deficit) | 862 | 1,811 | 3,354 | 15,970 | 15,477 | ||||
| Investment expenditure and net lending | 558 | 1,693 | 2,761 | 4,280 | 5,642 | ||||
| Domestically-financed | 438 | 1,427 | 2,613 | 3,754 | 5,116 | ||||
| Foreign-financed | 120 | 266 | 148 | 526 | 526 | ||||
| Statistical discrepancy | -17 | 155 | -54 | 0 | 0 | ||||
| Non-oil primary balance | -884 | -2,691 | -3,571 | -5,637 | -7,465 | ||||
| Consolidated government balance, cash basis | 321 | -37 | 646 | 11,690 | 9,835 | ||||
| Excluding foreign project loans | 441 | 229 | 795 | 12,216 | 10,361 | ||||
| Financing | -321 | 37 | -646 | -11,690 | -9,835 | ||||
| Domestic (net) 3/ | -436 | -223 | -830 | -12,390 | -10,494 | ||||
| External (net) | 115 | 260 | 183 | 700 | 659 | ||||
| Memorandum items: | |||||||||
| Oil revenue 4/ | 1,221 | 2,667 | 4,247 | 17,438 | 17,410 | ||||
| Non-oil revenue 5/ | 1,922 | 2,585 | 3,701 | 4,724 | 5,137 | ||||
| Implicit subsidies 6/ | 1,647 | 1,710 | 1,647 | 2,295 | 2,295 | ||||
Includes contingent revenues accrued on the “deposit account” of budgetary organizations.
Includes profit oil, acreage fees, and income earned on Oil Fund assets. Oil bonuses also enter in the Oil Fund, but these are treated as a financing item.
Includes changes in Oil Fund assets.
Includes SOCAR tax credits for energy subsidies.
Includes grants, VAT and excise taxes on oil and gas, and tax withholding on the Azerbaijan International Operating Companys’s subcontractors.
Fund staff estimates.
Fund staff projections reflecting the impact of the 2008 supplementary budget enacted on May 8, 2008.
Azerbaijan: Consolidated Central Government Operations, 2005–08
(In percent of non-oil GDP)
Includes contingent revenues accrued on the “deposit account” of budgetary organizations.
Includes profit oil, acreage fees, and income earned on Oil Fund assets. Oil bonuses also enter in the Oil Fund, but these are treated as a financing item.
Includes changes in Oil Fund assets.
Includes SOCAR tax credits for energy subsidies.
Includes grants, VAT and excise taxes on oil and gas, and tax withholding on the Azerbaijan International Operating Companys’s subcontractors.
Fund staff estimates.
Fund staff projections reflecting the impact of the 2008 supplementary budget enacted on May 8, 2008.
Azerbaijan: Consolidated Central Government Operations, 2005–08
(In percent of non-oil GDP)
| Prel. | SM/08/140 | Rev. Proj. 7/ | |||||||
|---|---|---|---|---|---|---|---|---|---|
| 2005 | 2006 | 2007 | 2008 | ||||||
| Total revenue and grants | 44.9 | 60.7 | 71.4 | 153.2 | 151.0 | ||||
| Total revenue | 44.7 | 60.6 | 71.4 | 153.2 | 151.0 | ||||
| Tax revenue | 27.2 | 38.6 | 50.6 | 45.3 | 46.6 | ||||
| Income taxes | 9.6 | 20.4 | 27.4 | 21.5 | 22.3 | ||||
| Individual income tax | 4.5 | 4.7 | 5.3 | 5.2 | 5.3 | ||||
| Enterprise profits tax | 5.1 | 15.7 | 22.1 | 16.3 | 16.9 | ||||
| Social security contributions | 2.8 | 3.4 | 4.9 | 4.0 | 4.1 | ||||
| Value added tax (VAT) | 8.6 | 8.5 | 10.6 | 11.9 | 12.6 | ||||
| Domestic | 4.9 | 4.5 | 5.8 | 6.8 | 7.6 | ||||
| Imports | 3.6 | 4.1 | 4.8 | 5.2 | 5.1 | ||||
| Excise taxes | 2.0 | 2.2 | 3.6 | 3.1 | 3.0 | ||||
| Taxes on international trade | 2.9 | 2.8 | 2.6 | 3.2 | 3.1 | ||||
| Other taxes | 1.2 | 1.3 | 1.5 | 1.6 | 1.6 | ||||
| Nontax revenue 1/ | 13.4 | 17.3 | 19.3 | 108.0 | 104.4 | ||||
| Of which: Oil Fund revenues 2/ | 8.5 | 11.4 | 16.3 | 105.3 | 101.8 | ||||
| Tax credits for SOCAR energy subsidies | 4.2 | 4.7 | 1.5 | 0.0 | 0.0 | ||||
| Total grants (current) | 0.2 | 0.1 | 0.0 | 0.0 | 0.0 | ||||
| Total expenditure | 40.5 | 59.3 | 66.1 | 72.4 | 85.1 | ||||
| Current expenditure | 32.6 | 39.8 | 41.3 | 42.8 | 47.3 | ||||
| Primary current expenditure | 28.2 | 34.9 | 39.5 | 42.0 | 46.6 | ||||
| Wages and salaries | 8.3 | 8.6 | 9.8 | 10.5 | 12.1 | ||||
| Goods and services | 10.2 | 14.8 | 16.7 | 17.4 | 20.5 | ||||
| Transfers | 9.1 | 10.2 | 11.7 | 12.8 | 12.6 | ||||
| Of which: social protection fund | 7.1 | 6.5 | 9.3 | 9.7 | 9.4 | ||||
| Subsidies | 0.4 | 0.5 | 1.4 | 1.3 | 1.3 | ||||
| Oil Fund (operating expenditures) | 0.0 | 0.0 | 0.0 | 0.1 | 0.1 | ||||
| Other | 0.1 | 0.8 | 0.0 | 0.0 | 0.0 | ||||
| SOCAR energy-related subsidies | 4.2 | 4.7 | 1.5 | 0.0 | 0.0 | ||||
| Interest | 0.2 | 0.2 | 0.3 | 0.8 | 0.7 | ||||
| Current balance (-, deficit) | 12.3 | 20.9 | 30.1 | 110.4 | 103.6 | ||||
| Investment expenditure and net lending | 8.0 | 19.6 | 24.8 | 29.6 | 37.8 | ||||
| Domestically-financed | 6.3 | 16.5 | 23.5 | 26.0 | 34.3 | ||||
| Foreign-financed | 1.7 | 3.1 | 1.3 | 3.6 | 3.5 | ||||
| Statistical discrepancy | -0.2 | 1.8 | -0.5 | 0.0 | 0.0 | ||||
| Non-oil primary balance | -12.6 | -31.1 | -32.1 | -39.0 | -50.0 | ||||
| Consolidated government balance, cash basis | 4.6 | -0.4 | 5.8 | 80.8 | 65.8 | ||||
| Excluding foreign project loans | 6.3 | 2.6 | 7.1 | 84.5 | 69.4 | ||||
| Financing | -4.6 | 0.4 | -5.8 | -80.8 | -65.8 | ||||
| Domestic (net) 3/ | -6.2 | -2.6 | -7.5 | -85.7 | -70.3 | ||||
| External (net) | 1.6 | 3.0 | 1.6 | 4.8 | 4.4 | ||||
| Memorandum items: | |||||||||
| Oil revenue 4/ | 17.4 | 30.8 | 38.2 | 120.6 | 116.6 | ||||
| Non-oil revenue 5/ | 27.5 | 29.9 | 33.3 | 32.7 | 34.4 | ||||
| Implicit subsidies 6/ | 23.5 | 19.8 | 14.8 | 15.9 | 15.4 | ||||
Includes contingent revenues accrued on the “deposit account” of budgetary organizations.
Includes profit oil, acreage fees, and income earned on Oil Fund assets. Oil bonuses also enter in the Oil Fund, but these are treated as a financing item.
Includes changes in Oil Fund assets.
Includes SOCAR tax credits for energy subsidies.
Includes grants, VAT and excise taxes on oil and gas, and tax withholding on the Azerbaijan International Operating Companys’s subcontractors.
Fund staff estimates.
Fund staff projections reflecting the impact of the 2008 supplementary budget enacted on May 8, 2008.
Azerbaijan: Consolidated Central Government Operations, 2005–08
(In percent of non-oil GDP)
| Prel. | SM/08/140 | Rev. Proj. 7/ | |||||||
|---|---|---|---|---|---|---|---|---|---|
| 2005 | 2006 | 2007 | 2008 | ||||||
| Total revenue and grants | 44.9 | 60.7 | 71.4 | 153.2 | 151.0 | ||||
| Total revenue | 44.7 | 60.6 | 71.4 | 153.2 | 151.0 | ||||
| Tax revenue | 27.2 | 38.6 | 50.6 | 45.3 | 46.6 | ||||
| Income taxes | 9.6 | 20.4 | 27.4 | 21.5 | 22.3 | ||||
| Individual income tax | 4.5 | 4.7 | 5.3 | 5.2 | 5.3 | ||||
| Enterprise profits tax | 5.1 | 15.7 | 22.1 | 16.3 | 16.9 | ||||
| Social security contributions | 2.8 | 3.4 | 4.9 | 4.0 | 4.1 | ||||
| Value added tax (VAT) | 8.6 | 8.5 | 10.6 | 11.9 | 12.6 | ||||
| Domestic | 4.9 | 4.5 | 5.8 | 6.8 | 7.6 | ||||
| Imports | 3.6 | 4.1 | 4.8 | 5.2 | 5.1 | ||||
| Excise taxes | 2.0 | 2.2 | 3.6 | 3.1 | 3.0 | ||||
| Taxes on international trade | 2.9 | 2.8 | 2.6 | 3.2 | 3.1 | ||||
| Other taxes | 1.2 | 1.3 | 1.5 | 1.6 | 1.6 | ||||
| Nontax revenue 1/ | 13.4 | 17.3 | 19.3 | 108.0 | 104.4 | ||||
| Of which: Oil Fund revenues 2/ | 8.5 | 11.4 | 16.3 | 105.3 | 101.8 | ||||
| Tax credits for SOCAR energy subsidies | 4.2 | 4.7 | 1.5 | 0.0 | 0.0 | ||||
| Total grants (current) | 0.2 | 0.1 | 0.0 | 0.0 | 0.0 | ||||
| Total expenditure | 40.5 | 59.3 | 66.1 | 72.4 | 85.1 | ||||
| Current expenditure | 32.6 | 39.8 | 41.3 | 42.8 | 47.3 | ||||
| Primary current expenditure | 28.2 | 34.9 | 39.5 | 42.0 | 46.6 | ||||
| Wages and salaries | 8.3 | 8.6 | 9.8 | 10.5 | 12.1 | ||||
| Goods and services | 10.2 | 14.8 | 16.7 | 17.4 | 20.5 | ||||
| Transfers | 9.1 | 10.2 | 11.7 | 12.8 | 12.6 | ||||
| Of which: social protection fund | 7.1 | 6.5 | 9.3 | 9.7 | 9.4 | ||||
| Subsidies | 0.4 | 0.5 | 1.4 | 1.3 | 1.3 | ||||
| Oil Fund (operating expenditures) | 0.0 | 0.0 | 0.0 | 0.1 | 0.1 | ||||
| Other | 0.1 | 0.8 | 0.0 | 0.0 | 0.0 | ||||
| SOCAR energy-related subsidies | 4.2 | 4.7 | 1.5 | 0.0 | 0.0 | ||||
| Interest | 0.2 | 0.2 | 0.3 | 0.8 | 0.7 | ||||
| Current balance (-, deficit) | 12.3 | 20.9 | 30.1 | 110.4 | 103.6 | ||||
| Investment expenditure and net lending | 8.0 | 19.6 | 24.8 | 29.6 | 37.8 | ||||
| Domestically-financed | 6.3 | 16.5 | 23.5 | 26.0 | 34.3 | ||||
| Foreign-financed | 1.7 | 3.1 | 1.3 | 3.6 | 3.5 | ||||
| Statistical discrepancy | -0.2 | 1.8 | -0.5 | 0.0 | 0.0 | ||||
| Non-oil primary balance | -12.6 | -31.1 | -32.1 | -39.0 | -50.0 | ||||
| Consolidated government balance, cash basis | 4.6 | -0.4 | 5.8 | 80.8 | 65.8 | ||||
| Excluding foreign project loans | 6.3 | 2.6 | 7.1 | 84.5 | 69.4 | ||||
| Financing | -4.6 | 0.4 | -5.8 | -80.8 | -65.8 | ||||
| Domestic (net) 3/ | -6.2 | -2.6 | -7.5 | -85.7 | -70.3 | ||||
| External (net) | 1.6 | 3.0 | 1.6 | 4.8 | 4.4 | ||||
| Memorandum items: | |||||||||
| Oil revenue 4/ | 17.4 | 30.8 | 38.2 | 120.6 | 116.6 | ||||
| Non-oil revenue 5/ | 27.5 | 29.9 | 33.3 | 32.7 | 34.4 | ||||
| Implicit subsidies 6/ | 23.5 | 19.8 | 14.8 | 15.9 | 15.4 | ||||
Includes contingent revenues accrued on the “deposit account” of budgetary organizations.
Includes profit oil, acreage fees, and income earned on Oil Fund assets. Oil bonuses also enter in the Oil Fund, but these are treated as a financing item.
Includes changes in Oil Fund assets.
Includes SOCAR tax credits for energy subsidies.
Includes grants, VAT and excise taxes on oil and gas, and tax withholding on the Azerbaijan International Operating Companys’s subcontractors.
Fund staff estimates.
Fund staff projections reflecting the impact of the 2008 supplementary budget enacted on May 8, 2008.
5. In the context of already binding supply constraints and an accelerating inflation trajectory, staff expects that the additional increase in public spending will result in higher inflation, a marginal increase in non-oil growth, and higher imports compared with the staff report projections. With inflation now projected to rise to 26 percent at end-2008, the risk of a price-wage spiral has increased substantially. The supplementary budget will also exacerbate the existing problems with the quality and efficiency of public expenditure due to limited administrative and absorption capacity. In view of increasing risks to long-term macroeconomic stability, staff now considers as critical a more cautious approach to budget implementation in 2008 and significant fiscal adjustment in 2009 to support a credible disinflation process. In addition, during the remainder of 2008, exchange rate and monetary policy will need to be used proactively to avoid that the inflationary impact of the supplementary budget gets out of control.
The original budget law was based on a 50 dollar per barrel average oil price for 2008. The supplementary budget assumes an average oil price of 70 dollar per barrel. Staffs’s projections, both in the staff report and in this statement, are based on the Spring WEO oil price projection of 95.5 dollar per barrel.