BUDGET 2013

Traditionally, in November, the Azerbaijani parliament starts debates on the draft state budget of Azerbaijan for 2013. As has become customary in recent years, the main figures of the main economic document broke the record again - according to forecasts, the budget revenues will grow by 12.4 per cent, expenditure - by 12.1 per cent and deficit - by 3.5 per cent.

The revenues of the state budget of Azerbaijan are projected at 19.2 billion manats and expenses - at 19.8 billion. Azerbaijan's GDP in 2013 is projected at 56.1 billion manats and economic growth - at 5.3 per cent.

Policy justified by the economy

So what do the above figures mean, in principle? First of all, the excess of the dynamics of growth in the revenues of Azerbaijan's state budget for 2013 over the pace of the country's economic growth confirms that the fiscal policy will continue to be a mechanism to maintain economic growth. By the way, in many countries, including in developed countries, the fiscal policy is designed to prevent the slowdown of the economy or keep it at the same level. In Azerbaijan, there is a tendency when the fiscal policy serves as a mechanism to maintain economic growth.

A characteristic feature of the state budget for 2013 is the balance between expenditure and revenues, which affects the conservation and reduction of the budget deficit. Even though the financial resources of Azerbaijan make it possible to implement the budget without a deficit, to ensure the stability of the country's financial system, the government continues to shape it with a deficit, which is projected at 1.17 per cent of GDP next year. The matter is that the budget deficit is one of the important elements for the financial system, especially the banking system and insurance companies, as the government issues government securities so that banks are able to place their excess liquid assets. Unlike other countries, Azerbaijan does not increase the budget deficit from year to year and does not fill it with money from the placement of securities, and thus successfully avoids the problems faced by many countries in Europe. In 2013, for example, the budget deficit will be funded from privatization and proceeds of government securities (including the placement of government bonds abroad). Another source for filling the budget deficit is the remains of funds in the single treasury account of the state budget as of 1 January 2014.

Oil for benefit

Meanwhile, one of the important criteria of budget efficiency is the degree of its dependence on the processes in the world economy. The establishment of a stable oil price of $ 100 per barrel in the state budget of Azerbaijan, while it is changing on global markets, testifies to the satisfactory level of this criterion for the country. And this is important: in 2013, direct payments from the oil sector will account for 79 per cent of Azerbaijan's state budget.

At the same time, 59.3 per cent of Azerbaijan's budget revenues will be provided from transfers from the country's State Oil Fund. The oil sector will help provide 41.2 per cent of total tax revenues.

Interestingly, the share of the oil sector in next year's GDP is projected at 38.6 per cent - against 43.4 per cent in 2012. It is predicted that next year it is planned to decrease oil GDP by 2.9 per cent, and this year - by 4.5 per cent and increase non-oil GDP by 11.7 and 9.6 per cent respectively.

Despite the decline in the share of the oil sector in GDP, Azerbaijan is returning to higher oil and gas production. Oil production in 2013 is expected to reach 43.2 million tonnes and natural gas - 28.8 billion cubic metres.

From socially-oriented to investment

Also, by tradition, while preparing budget forecasts, special attention was paid to their social and investment focus, strengthening of social protection of the poor, increasing the country's defence potential and economic power, boosting energy and food security, support for business development, financing of targeted state programmes in line with the strategy of state development and priority areas.

In other words, the budget priorities will remain the same. First place is taken by social costs, second place - investment and third place - defence. Social spending is protected by the law and cannot be reduced. As neighbouring Armenia has occupied 20 per cent of the country's territory, defence spending cannot be reduced either. In this regard, changes (in the event of a force majeure situation such as a decline in world oil prices) may occur in the paragraph on investment spending.

Speaking in the language of figures, expenses on the social sphere in the state budget of Azerbaijan for 2013 are planned to be more than 5 billion manats, which is 7.1 per cent more than in 2012. According to the Ministry of Finance, in 2013 it is planned to increase salaries for 700,000 public sector employees and civil servants, on which 240 million manats will be spent. Thus, the average monthly salary for 2013 is planned to be at the level of 440.3 manats, and its annual growth will be 3.9 per cent.

In general, the total share of social expenses in 2013 will account for 25.4 per cent of budget expenditure. And social projects involve not only an increase in the wages of public sector employees. Specifically, in 2013, it is planned to significantly increase mortgage funding and education expenses.

Also, the government of Azerbaijan will retain the investment focus of the state budget, planning state investment at 6,915.2 million manats, or 34.9 per cent of expenditure. The main fields of development in 2013, which will be included in the State Investment Programme for the upcoming year, were announced by Azerbaijani President Ilham Aliyev at a meeting dedicated to the country's socioeconomic development in the first nine months of this year. He noted that one of the priorities of development will still be the transport sector and called for high-speed railways to be launched in the country. "If we consider that in the near future, Azerbaijan will become a major transit country in the field of transport and the construction of the Baku - Tbilisi - Kars railway is nearing completion, Azerbaijani railways should also meet high international standards," the head of state said.

Next year tourism and agriculture are also expected to develop. The government hopes that the intensive efforts to develop the agricultural sector in Azerbaijan will bear fruit in 2013, when large farms get off the ground and yield no less than 50 quintals per hectare, whereas the current figure is 26 quintals.

In other words, oil revenues will make it possible to continue the development of the construction and reconstruction of industrial, transport, energy, agriculture and other infrastructure facilities, social and cultural institutions, etc.

In addition, for the first time next year political parties of Azerbaijan will be allocated funds. Parties will be allocated two million manats in total. According to official figures, due to the fact that other political parties failed to overcome the 3-per-cent barrier in the elections, these funds will be distributed among the 11 parties represented in the parliament. The distribution will be carried out based on the number of deputies from parties.

As we can observe from the forecast indicators, the factors contributing to the growth of the economy are changing in Azerbaijan, and in the process of the development of the Azerbaijani economy, there are more and more quality changes. However, the government also suggests that over time, the rate of growth in the non-oil sector of the economy will naturally decline as an endless 10-per-cent growth in non-oil GDP is impossible.

According to estimates of the Ministry of Economic Development, to accomplish the task of doubling the GDP in the next 10 years set by the head of state, the non-oil sector of the economy needs to grow by an average of over 7 per cent a year. The main thing is to maintain stability and to be able to keep the balance between the oil and non-oil sectors. And then the former will always benefit the latter.