THE START OF THE FISCAL YEAR

In the last days of December, Azerbaijani President Ilham Aliyev approved the state budget for 2024. The revenues are calculated on the basis of an average oil price of $60 per barrel. Traditionally, almost 43% of budget expenditures are related to social programmes and missions.

Apparently, budget expenditures have increased 30 times over the last 20 years—less than ₼150 per capita in 2003 against more than ₼3,500 today.

Almost evenly split

In 2024, Azerbaijan's state budget revenues are expected at ₼34.2b (0.8% more than last year), expenditures at ₼36.8b (0.4% more). Accordingly, we have a deficit of ₼2.6b, or 2.2% of GDP. As stated in the preamble to the budget, the geopolitical situation in the world continues to be tense, which ultimately affects macroeconomic processes, disrupting established supply chains and reducing overall economic growth. Another important factor for Azerbaijan is a certain decline in oil production, which naturally affects state revenues. Thus, compared to the 2023 state budget, oil sector revenues (including transfers from the State Oil Fund) will decrease by 4.3%. Ratio between the shares of the oil and non-oil sectors in the total budget is balancing every year and will be 50.2% (₼17.2b) and 49.8% (₼17b), respectively in 2024. At the same time, total non-oil revenues will grow by 6.6 per cent.

"We have been able to diversify our economy and reduce our dependence on the oil and gas sector, although the oil and gas sector continues to be a major part of our economy. This year (2023), our economic growth is a little more modest due to a slight decline in oil production. But if we look at past years, Azerbaijan's Gross Domestic Product (GDP) has more than quadrupled in the last twenty years. And this was a very notable achievement," President Ilham Aliyev recently noted in his interview with Euronews.

In the structure of state budget revenues in 2024, transfers from the State Oil Fund are planned at the level of ₼12.8b (+8.9% of the 2023 forecast), VAT revenues at ₼7.6b, income tax at ₼5.7b, personal income tax at ₼1.9b, excise duties at ₼1.5b, and customs duties at ₼1.5b.

At the same time, the government plans to further increase the share of non-oil revenues in the state budget. "In the coming years, it is important to continue the adopted fiscal policy to consistently reduce the ratio of the non-oil deficit of the non-oil base of the consolidated budget to non-oil GDP and ensuring budget expenditures by increasing revenues from the non-oil sector." Azerbaijan Finance Minister Samir Sharifov said.

Three destinations of budget expenditure

As mentioned above, the state budget of Azerbaijan has been traditional based on social sphere. This year, social expenditures are projected at ₼15.8b, i.e., 7% more than in 2023. "Over the past five years, non-oil sector revenues to the state treasury have increased by ₼6b, while social expenditures have also increased by the same amount over the same period. In total, more than 2.3 million citizens of Azerbaijan receive social benefits directly or indirectly from the state budget, which makes almost 23% of the population," Chairman of the Parliamentary Committee on Economic Policy, Industry and Entrepreneurship Tahir Mirkishili said in an interview. He added that increasing the amount of social benefits also affects the growth of economic activities in the country, which is the main goal of economic policy.

Another major stimulating factor is construction and reconstruction projects in the liberated territories. As Prime Minister Ali Asadov said earlier, ₼12b has been allocated from the state budget for this purpose in 2021-2023, with another ₼4b envisaged for 2024. "A total of ₼30.5b is needed for this purpose in 2022-2026, and ₼14.5b is planned to be allocated in the following years (2024-2026)," Asadov said.

According to plans, 34,500 families, or 140,000 people, will return to Garabagh and Eastern Zangezur by the end of 2026. "To do this, it is necessary to invest significant funds in infrastructure and housing projects, as well as in social infrastructure projects... This will be the main direction of the state investment programme," President Ilham Aliyev said.

The third important vector of state expenditures—defence and national security—will total ₼6.4b. So, their share in 2024 will be 17.4%. Compared to 2023, these expenditures will increase by 6%, which is quite justified given the geopolitical situation.

Thus, the 2024 state budget of Azerbaijan will be committed to maintain stable economic development and implement the most important social missions. President Ilham Aliyev has noted that no economic risks were expected even amid the continuing geopolitical tension. "So far our economy has been developing in a positive direction. Our economy has seen growth even under much more difficult geopolitical situation, even during the occupation. Now, when we have fully restored our territorial integrity and sovereignty, we are carrying out large-scale economic reforms that makes it possible to accumulate more funds in our budget," Aliyev said.

This year's budget will fully cope with the set tasks and support the main priority of Azerbaijan's economic development—stability.