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Azerbaijan is racing to capitalize on skyrocketing oil prices

Rising oil prices have forced Azerbaijan to increase its state budget, earmarking higher spending on defense and reconstruction in Karabakh. On 20 June, the Economic Policy and Labor and Social Policy Committees of the Azerbaijan Parliament Met Discuss Finance Ministry’s proposal to increase Budget 2022 by 8.1%, bring spending to 32 billion manats [$19 billion].

“Taking into account the positive dynamics of the country’s economic indicators, the state and the consolidated budget is higher than forecasted. President Ilham Aliyev instructed a growing portion of revenue for construction work on liberated land. Sharifov said he has ordered spending increases for security and security, “additional reserves for food security” and new infrastructure projects.

Additional revenues are coming from the global rise in oil prices; Oil revenues Account for about half Azerbaijan State Budget.

As of June 22, the barrel price of Azerbaijani crude oil – branded as Azeri Lite – The stock traded at $ 121.73. The 2022 budget is set at $ 50 based on an oil sales projection, but the average price of oil in the first five months of 2022 is $ 106. As a result, the state’s budget is four times higher than projected.

On top of that, taxes collected this year amount to about 2 billion manats [$1.2 billion] More than planned, the Ministry of Finance reports to committees.

According to Draft BillConstruction projects in Karabakh are the largest recipient of the cost boost, which now receives 2.7 billion manats [$1.6 billion]A 21 percent increase from the current budget. Protection and national security 5 billion manats can see a 13 percent increase [$3 billion].

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Social care costs for low-income Azerbaijanis are estimated to grow by 2.4 percent and for education by 0.06 percent. Spending on health care will be reduced in the revised budget.

Critics have said that the areas that favor indigenous corruption are particularly ripe at the expense of the Azerbaijani government.

“Unfortunately, the Aliyev regime did not again allocate funds to the needy by increasing the state budget, but prioritized areas with high potential for corruption. Written on Facebook. “Of particular concern here is the rise of corruption in the field of defense and national security, in the name of the reconstruction and restoration of liberated areas in Karabakh.”

Azerbaijan regularly adjusts its budget to keep track of oil prices, while increasing or decreasing prices. In the former case it does so because it has too much revenue to spend, while in the latter it states that the economy needs to be stimulated by a decline in income, writes economist Elmir Mukhtarov. Recent analysis For BNE IntelliNews.

“[T]Mukhtarov wrote that counter-cyclical monetary policy arguments are only offered when oil prices are falling, and magically ‘forgotten’ when oil prices rise.

Mukhtarov argued that the government should invest windfall in the sovereign wealth fund, the State Oil Fund.

“Azerbaijan’s oil production is steadily decreasing, and proven gas reserves are not even close to offsetting lost oil revenues,” he wrote. “So now it is imperative for us to be more careful when designing our fiscal policy, as it is the last time Azerbaijan will enjoy a higher level of revenues from the oil / gas sector.”

Via eurasianet.org

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