IN CONDITIONS OF CRISIS

Despite the strenuous efforts of the governments of the world's leading countries to curb the rampant economic crisis, they have made little progress so far. Although there are more hopeful predictions of its weakening by the end of the year, real changes are still not apparent. Further, analysts warn of a post-crisis period of depression, no less stressful than the crisis itself. In this case, Azerbaijan, which has managed to insure itself against the worst effects of the crisis, will have to undergo a further test during the post-crisis period. Is the government ready for this? We put these questions to Azerbaijani Minister of Finance Samir Sarifov.

- How do you assess the current economic situation in Azerbaijan in conditions of global financial crisis?

- I can confidently say that despite the crisis, the economic situation in Azerbaijan is stable but, at the same time, the government is continuing its work to soften its impact. The National Bank is also continuing its efforts to ensure the liquidity of the banking sector. It must be remembered that in order to maintain the financial stability of major banks and to maintain their creditworthiness within the country's economy, the rules of mandatory redundancy have been relaxed. At the same time, we should remember that almost all neighbouring countries have encountered serious problems, while some national currencies have devalued sharply and others are close to default.

One way or another, we are following the situation closely and are taking urgent measures. At the same time, we are considering ways to increase the effectiveness of state budget expenditure. For example, the state budget already has certain reserves which are the result of falls in the level of consumption, as is the case worldwide. In turn, this brought about a fall in prices, and this leads to cuts in expenditure in the implementation of some state programmes. The funds freed in this way will be redirected to measures to support the real sector. First and foremost, we are talking about small and medium-sized businesses and farmers, who will receive the greatest support in the form of privileged loans.

Today, privileged long-term loans are allocated from the National Fund to Support Entrepreneurship of the Ministry of Economic Develop-ment (this year it is planned to allocate 130 million manats) and from the Agency for Agricultural Credit of the Ministry of Agriculture (10 million manats). By instruction of President Ilham Aliyev, the amount of privileged loans will increase.

I want to emphasize that, despite the crisis, no problems are expected in the implementation of social programmes. The government is fulfilling all obligations stipulated by the state budget and envisage the payment of salaries, pensions and social allowances; everything is stable here.

- Incidentally, let's talk about support for the real sector. Recently, businessmen and their organizations have been suggesting the granting of tax privileges to the private sector during the crisis. Is the government considering adopting such privileges?

- Yes, this issue is on the agenda, but for the time being, I cannot say specifically what privileges will be granted and what spheres they will cover. By instruction of the head of state, tax privileges will be aimed at improving the business environment. Currently, a package of proposals is being prepared, and it is planned to submit them to the government for consideration in the near future.

I should remind you that in order to reduce the impact of the crisis on the banking sector, tax privileges on the revenues of banks and insurance organizations (profit used for the capitalization of these financial organizations will not be liable to profit tax - author) have been introduced for a period of three years from 2009. Moreover, the tax privileges for farmers have been extended for another five years from 2009. Azerbaijan also has tax privileges for interest on deposits made by people to banks and other credit organizations, dividends on investment securities and income from interest.

- When the state budget of 2009 was adopted, there was a lot of argument about some of its parameters, specifically, the forecasts for oil prices. Analysts believe that this year oil prices on the world market will hardly reach the 70 dollars set in the Azerbaijani budget. Is it necessary to correct the forecasts?

- The ongoing world economic crisis is of foreign origin, and its development and the problems it has caused are related to foreign factors. For these reasons, there is no need today to reconsider the budget forecasts, but we cannot deny that other negative events in the world economy may arise in the near future. In this case, the Azerbaijani government will take appropriate steps, but we are not considering this issue today.

Yes, state budget forecasts were shaped on the basis of an oil price of 70 dollars per barrel but, since last year, oil prices on the world market have slumped, and they are even below 50 dollars now. But I have to point out that our revenues have been reduced not so much by the fall in oil prices on the world market as by the fall in oil extraction by the Azerbaijan International Operating Company. But we have already received information from the AIOC that the fall in extraction is temporary and extraction will increase in the near future, i.e. during 2009.

- Will the global economic crisis affect the government's plans to resume issuing mortgage loans?

- I can say that today the issue of financing social mortgages from the state budget depends on the Azerbaijani Mortgage Fund (AMF), i.e. there is no problem with the allocation of money from the state budget and everything depends on when the Mortgage Fund asks the Ministry of Finance for the money. We have the necessary monetary resources and, as soon as they are requested, financing from the budget will begin immediately. We are ready for this at any time, even if we receive a request in the next few days (the state budget allocates 14.5 million manats for financing social mortgages - author).

- Can Azerbaijan ask international financial organizations for assistance in eliminating the consequences of the world crisis soon, as has been done by many other countries? For example, from the International Monetary Fund (IMF)?

- Currently, Azerbaijan has no programmes with the IMF and the government has already been cooperating with the IMF at the level of consultations for four years. We have no intention of addressing the fund as other states affected by the world crisis have done.

It must be noted that in conditions of global financial crisis, the funds available to the IMF do not cover the requirements of the counties that have encountered problems. It is no secret that some European countries are facing default and, in order to avoid this, those countries need urgent financial support. The main task of the IMF is to ensure liquidity and so the G20 countries have decided to increase the International Monetary Fund's capital with their own money in order to pass it on to countries that need it.