HEADING FOR REFORM

The fall in oil prices to lows over the past 10 years, the weakening currencies of neighbouring countries, including those of Russia and Kazakhstan and the sharp drop in the foreign exchange reserves of the Central Bank of Azerbaijan affected the stability of the national currency - the manat. As a result, the country entered the new year with a new rate. And in 2016, the Azerbaijanis will have to get used to living with a new "floating" exchange rate of the manat and in new economic conditions. However, the government promises that the transition will not be too painful.

"Unfortunately, the processes taking place in the world do not give grounds for optimism next year. Therefore, it is possible that the crisis will continue," President Ilham Aliyev said while commenting on the latest developments on the foreign exchange market. According to him, the main reason for the change in the rate of the manat is the three-fold drop in oil prices. "During the year, we tried our best to prevent it. We expected the oil prices to stabilize," the president added.

The fall in prices to 36 dollars per barrel was definitely supposed to lead to the weakening of the manat. Fuel to the fire was added by the fact that the Fed increased the discount rate.

As a result, on 21 December, the rate of the manat dropped by 47 per cent and is 1.55 manat for one dollar. And if after the February devaluation, it was largely possible to curb the rise in consumer prices, now this task seems impossible.

"The devaluation will not only lead to a rise in the price of imported agricultural products. It will have an indirect effect on domestic production," Minister of Agriculture Heydar Asadov said. According to him, this is due to the rising expenses of farmers, as they acquire imported goods at different stages of production. "We plan to increase the number of agricultural fairs held in the country, which will provide agricultural products with direct access to the market in order to prevent an artificial rise in prices," Heydar Asadov said.

However, throughout this objective process of price hikes, the chaotic nature of what is happening and sometimes the extreme immorality of some businessmen are depressing. For example, there was an unauthorized multiple increase in the prices of some kinds of medicines. Fortunately, the Tariff Council later formally approved the prices for thousands of medicines, which can somehow restore order in the pharmaceutical business. On the other hand, the Ministry of Economy and Industry and the Prosecutor General's Office issued a statement about the preparation of a joint action plan to combat the artificial increase in prices after the devaluation, the deliberate creation of a deficit and other attempts to abuse the situation.

In any case, in this respect there is a clear instruction by the head of state: "Judging by the results of this year, inflation is less than 4 per cent. We should try to keep it at the lowest level next year, too. In recent years, we have attached great importance to local production and allocated funds to both the public and private sector. The vast majority of food products are produced in Azerbaijan. There-fore, prices for food products manufactured in Azerbaijan should remain stable, just like for building materials," the head of state said.

He stressed that in recent years Azerbaijan has created a strong construction industry and is self-sufficient in basic construction materials.

"Azerbaijan is also self-sufficient in fuel. If you look at the cost of petrol and diesel fuel, you will see that it is three times lower than in Western countries. Therefore, a rise in price is out of the question in this area. Fares on public transport - metro and buses - are at a very low level. That is to say we will try to reduce the negative impact of this inevitable decision as much as possible, primarily by deepening reforms," Ilham Aliyev said.

He noted that an even more serious struggle will be waged against bribery, corruption, monopolization and illegal activities. "Monopolies should not be allowed either in import or in local production. Those who get in the way of state budget revenues will be punished. Therefore, maximum transparency must and will be ensured in the customs and tax systems," the president said.

Meanwhile, the devaluation has also seriously affected the tourism sector, especially companies involved in the organization of holidays abroad - tickets for travel packages have increased significantly. As for domestic tourism, Minister of Culture and Tourism Abulfaz Qarayev said that if consumer prices rise, the cost of holidays at local tourist facilities will increase as well.

Banks are also faced with big problems in the country, and the growing number of problem loans is particularly acute. The Central Bank has held an emergency meeting with representatives of the banking community and recommended that customers who have loans in dollars be provided with appropriate assistance and these loans be restructured. At the same time, it was noted that the Central Bank will help banks to get out of this situation, but believes that the process of consolidation in the banking sector should be accelerated.

Despite this, it is not known whether the parameters of the budget for the coming year or any macroeconomic indicators will be revised. However, there is a statement by Minister of Labour and Social Security Salim Muslimov that the ministry is monitoring food prices, which are included in the consumer basket, and on the basis of these data it will be known how much incomes have fallen, in connection with which the necessary decisions will be taken. In addition, the head of the State Social Security Fund, Elman Meh-diyev, said that the indexation of the insured part of pensions in Azerbaijan will be carried out at the level of inflation at the end of 2015 (most likely it will be 4 per cent).

At the same time, as the saying goes, there is a silver lining in every cloud, and such profound changes in the global economy and at first glance, their negative impact on Azerbaijan's economy may have the opposite effect in the medium term. Specifically, we are talking about accelerating the diversification of the economy and transition to the domination of the oil sector in it. That was the aim of the economic reforms of recent years, and now, as can be seen, they will be accelerated and deepened.

"I have already said that we have to create an economic system and a control system that does not depend on oil prices. If we depend on them, we can face this unpleasant situation every time," President Ilham Aliyev said.

That means that just having a diversified economy and a strong non-oil sector, it is possible to consider yourself insured from external economic upheavals. "Economic liberalization, free, healthy competition, elimination of negative phenomena, an even more serious fight against corruption and bribery, and economic reform - that is our way. We go this way, but we must and will go even faster. I want to say again: Azerbaijan will go its own way," the head of state said.

Yes, the next year will be difficult for the economy of Azerbaijan. First of all, because it will have to get used to new market conditions, change the policy of development and work hard to be able to keep the high levels of development achieved in recent years. At the same time, the government promises to fulfill major challenges facing the country despite all the "surprises" of 2015.

Well, people normally hope for a miracle and wait for positive changes in the new year. But we've all grown out of the age of belief in fairy tales, and we know that we create all miracles ourselves with our own hands.