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 Economic Indicators This section contains several articles: 1. Economic Outlook, 2001 Dr. Rupinder Singh, Senior Economist, The Economist Intelligence Unit and former advisor to the Azerbaijan government 2. Economic Indicators and Reform Challenges, 2001 Mark Dutz, Office of the Chief Economist, EBRD 3. Fiscal Policy, 2001 The Honorable Avaz Alakbarov, Minister of Finance 4. A Glimpse at U.S. Exports and Imports in 2000 Derek Nowek and Kelly Raftery, BISNIS, U.S. Department of Commerce To obtain the following articles, please contact USACC Economic Outlook Dr. Rupinder Singh Senior Economist, The Economist Intelligence Unit and former advisor to the Azerbaijan government MEDIUM-TERM HORIZON TO 2005 Executive Summary
Real GDP grew by 11.1% in 2000, largely as a result of high oil prices and the recovery of regional demand. Real GDP growth will moderate to an annual average growth rate of about 8% in 2001-05. The energy sector will continue to be the chief engine of growth, with foreign direct investment (FDI) inflows peaking in 2003. ? The government will take advantage of high oil export revenue to ease monetary policy and embark on limited expansionist programmes such as strategic infrastructure projects. Growth in the non-oil sector will continue to lag behind that in the oil-based sector, and uneven supply-side and banking reforms will lead to at best moderate gains in the business environment. ?
Annual average inflation will rise to an annual average 3.5% in 2002-05, with continuing fiscal prudence and slight monetary easing to 2002. Real exchange-rate stability is expected to continue until 2005, when the volume of oil exports and related revenue proceeds surge, causing real appreciation. ? The fiscal deficit narrowed in 2000, as a result of strong economic growth and high oil prices. Balanced budgets are not expected until after 2005, when oil exports and related fiscal receipts will increase substantially. The current account is estimated to have posted a small deficit in 2000, but is forecast to record higher deficits from 2001, as oil prices ease and FDI increases.
Points to watch
Although our baseline assumes limited reform
zeal, the combination of recent institutional changes coupled with
the IMF agreement concluded in early July could catalyse faster structural
reform, particularly in banking and agriculture, which would raise
our assessment for medium-term sustainable growth. The risk of a hard
landing in the US has given way to one of assessing how hard it will
be and how long it will last. A protracted US slowdown and global
deceleration in demand could, in an environment of excess global oil
supply, lead to a rapid fall in world oil prices, thereby affecting
both the inflows on the current account and fiscal receipts.
Business environment rankings
Azerbaijan's regional ranking in the EIU Business
enviornment ranking worsens from 5th for the historical period to
8th for the forecast period, and its global ranking falls by 2 places
to 52nd out of 60 countries. Despite a continuing reform drive in
Azerbaijan, other transition economies are making faster progress.
The macroeconomic environment will remain stable, but the unresolved
Nagorno-Karabakh dispute, concerns about political stability, overreliance
on the oil sector and lagging structural reforms will maintain the
country’s relatively high risk business environment profile.
SHORT TERM OUTLOOK TO 2002 Economic policy outlook Policy trends
With macroeconomic stabilization secured in
recent years, structural and institutional reform will continue, albeit
at a moderate pace. The approval in July of a three-year, US$100m
loan from the IMF is conditioned on deeper fiscal reforms, including
greater governance in handling public funds, the creation of an oil
fund and further liberalisation of the trade regime. Monetary policy
will ease and the nominal exchange rate will depreciate at a faster
pace than previously expected, as the authorities attempt to reverse
the real appreciation against the Turkish lira recorded in the first
half of 2001. Fiscal policy will remain broadly sound, although more
transparent accounting of formerly off-budget “quasi-fiscal” activity
through state-owned enterprises will moderate recorded fiscal surpluses.
Privatisation of remaining state assets will remain sluggish and non-transparent.
Fiscal policy
Fiscal policy will further improve as the government
continues to widen the tax base and maintain better control over expenditure.
Following the deficit in 2000 of Manat239.2bn (US$53.5m; 1.8% of GDP),
we expect the 2001 consolidated general government deficit to be 1.9%
of GDP, slightly below the government’s target of 2%. As part of the
IMF agreement, the government will set up an oil fund, which will
assist in reducing the implied volatility of budgetary revenue streams
resulting from changes in oil prices. It will also improve the planning
and execution of multi-year fiscal accounts. Planned reforms to the
Customs Committee and improved internal auditing will further assist
fiscal management, although we expect little headway in aggressively
reducing quasi-fiscal implicit subsidies. The 2001 budget is broadly
realistic in assuming an average oil export price of US$21/barrel
(lower than our forecast for Dated Brent crude in 2001, which we have
revised upwards to an average US$27/b), although the average exchange
rate assumed in the budget of Manat4,600:US$1 will be exceeded. The
2001 budget should benefit from rising value-added tax (VAT) collection,
and, once initial problems of implementation have been overcome, a
new and more effective tax code. The state budget was in surplus in
the first four months of 2001 by Manat25.1bn (US$12.7m), equivalent
to 0.3% of GDP.
Economic forecast
International assumptions
On balance, we expect external conditions for
Azerbaijan to remain relatively favourable in 2001-02, with a limited
risk of external shocks. Despite the sharp global slowdown in 2001
on the back of a slowing US economy, both US and global growth are
forecast to pick up in 2002. However, there is a risk that a protracted
US downturn would compress oil prices below the average of US$26-27/b
that we expect for 2001-02. Cotton prices are expected to be firmer
in 2002, despite recent one-year lows in May 2001. We expect Turkish
real GDP to decline by 5% in 2001, before rebounding in 2002, which
together with the large devaluation in February of the Turkish lira
will reduce demand for Azerbaijani tradables in 2001. However, continuing
growth in the Commonwealth of Independent States (CIS), and in particular
Russian markets, will have a positive impact on Azerbaijan's exports.
Azerbaijani policymakers will continue to monitor foreign-exchange
developments, particularly of the Russian rouble and Turkish lira,
both of which will depreciate in nominal terms against the US dollar
in 2001-02, putting pressure on Azerbaijan to sanction competitive
devaluation to assist the non-oil tradable sector.
Economic growth
We expect real GDP growth in Azerbaijan to moderate
from 11.1% in 2000 to over 8% per year in 2001-02. Rising volumes
of oil exports will partly offset the expected decline in oil prices,
although we expect oil export volumes to be below 2m barrels/year,
compared with the government’s recent projections of 2.5m b/y. The
spill over from the oil boom into construction will continue, while
growth in agriculture will remain restrained, owing to poor financing
and lagging supply-side reforms. We expect foreign direct investment
(FDI) to continue to flow into the energy and construction sectors
at a rate of over US$1bn per year, contributing to growth in gross
fixed investment. Although oil-based revenue and fees will allow the
government to increase welfare payments, economic growth will remain
narrowly based.
Revised estimates for 2000 show an increase
in Azerbaijan's nominal GDP from Manat21.9trn to Manat23.6trn, although
real GDP growth has been adjusted downwards by 0.3 percentage points,
to 11.1%, as a result of a higher valuation for the GDP deflator.
Nominal GDP in the first five months of 2001 was Manat8.3trn, up by
8.3% year on year in real terms, with both industrial production and
agricultural production posting rises of 5.5%. Oil production is expected
to increase in 2001, as is investment, both of which posted only modest
rises in 2000. The Azerbaijan International Operating Company (AIOC,
the main foreign oil consortium in the country) plans to raise oil
output in 2001 by around 5%, and will increase investment substantially.
Inflation
Average inflation was 1.8% in 2000, a substantial
acceleration from the 8.6% deflation in 1999. Annual inflation was
1.3% in May 2001, compared with a rate of 2% in May 2000, with average
monthly inflation at 0.8% in the first five months of 2001. We expect
annual average inflation in 2001 to moderate to 1.7% on the back of
a strong exchange rate that will reduce imported inflation and excess
supply on the domestic market. We expect a slight acceleration in
inflation in 2002 to an annual average of 2.4% in response to monetary
loosening. The balance of inflationary risks in 2002 is on the downside.
Poor financial intermediation and inadequate creditor rights will
prevent the threat of credit-based inflation. However, higher than
expected currency inflows will, without a compensating rise in US
dollar money demand on the interbank market, lead to higher manat
monetization, which will have inflationary consequences.
Exchange rates
The medium-term objective of the Azerbaijan
National Bank (ANB, the central bank) remains to retain real exchange-rate
parity against the US dollar, which it has successfully retained since
late 1997. The manat stabilized in the second quarter of 2001, following
the contagious impact of the Turkish financial crisis and devaluation
of the Turkish lira in the first quarter of the year. The ANB inter-vened
heavily—equivalent to 4.5% of total currency turnover at the inter-bank
market over the quarter—to prevent the manat from depreciating by
too much from the ANB’s perceived equilibrium rate. With confidence
in the manat re-established and the contagious impact of the Turkish
crisis on payment and settlement systems controlled, the ANB is expected
to countenance some devaluation against the Turkish lira to recoup
the real loss of the first quarter. We expect year-end nominal exchange
rates of Manat4,788:US$1 in 2001 and Manat5,000:US$1 in 2002, implying
devaluation of 4.4% per year in 2001-02, and slightly above the 4.1%
nominal devaluation in 2000.
Currency turnover rose in June on the interbank
market, with the ANB buying US dollars to maintain the stability of
the currency. The higher demand for manat was attributable to the
push by the State Oil Company of the Azerbaijan Republic (SOCAR) to
settle tax arrears by converting a large volume of hard currency.
Although this one-off transaction does not augur a reversion to a
trend of nominal exchange-rate appreciation, we have moderated our
earlier forecasts of the extent of likely manat nominal depreciation
in 2001-02.
External sector
The
current-account balance is expected to return to the trend of deficits
as a share of GDP, following the temporary respite in 2000 caused
by buoyant oil prices. Lower oil prices in 2001-02 will lead to
relatively weak growth in export revenue, despite a slight increase
in oil export volumes. On the import side, costs will rise substantially.
In 2001 and 2002 high investment into the AIOC phase one expansion
project will lead to a rise in imports of capital goods. Services
debits related to development of the oil sector will also increase.
The development of the Shah Deniz gas field is expected to start
in the second half of 2001, following the recent signing of a 15-year
gas sales contract with Turkey. This will require investment of
US$2.6bn, according to BP, as well as a further US$700m investment
in a pipeline between Baku and Erzurum in Turkey, which will also
contribute to import expenditure. The current account is therefore
expected to be in deficit in 2001-02, although at US$253m (4.3%
of GDP) the deficit in 2002 will be modest compared with those in
the recent past. The current-account deficit will remain sustainable,
owing to compensating oil- and gas-related inflows of FDI on the
capital account. Azerbaijan recorded a trade surplus in January-May
2001 of US$440m, with exports of US$811m and imports of US$371m.
Oil-based exports accounted for 90% of export receipts in this period.
RECENT ECONOMIC DEVELOPMENTS
Continued strong growth fuelled by investment in oil and gas sectors. High oil prices and stronger demand from Russia contributed to 11.1 percent GDP growth in 2000, accelerating from 7.4% in 1999. Although growth has been more broad-based than in previous years, with strong increases in metallurgy, chemical and petrochemical production, and agriculture, oil continues to be the leading sector, accounting for roughly 85% of exports. In March, Azerbaijan and Turkey signed key 15-year gas purchase agreements that created the commercial and legal framework for developing the Shah Deniz gas field and proposed Baku-Tbilisi-Erzurum gas export pipeline. Together with continued investor interest in the Sponsor Group for the proposed Baku-Ceyhan oil pipeline (with the basic engineering study completed in May and the detailed engineering launched in June) and further development of the Azeri-Chirag-Guneshli oil fields, expected investments in oil and gas should stimulate further growth forecasted at 8.5% for 2001.
Inflation and exchange rates remain stable, underpinned by sound fiscal and monetary policies. Annual average inflation for 2000 rose to 1.8%, from -8.5% in 1999, in response to a slightly loose monetary policy aimed to make credit more easily available to the non-oil sectors. It is estimated at 1.3% for 2001. A mild, steady depreciation of the nominal USD exchange rate in 2000 appears to have prevented an appreciation of the real effective exchange rate. The 2000 consolidated government fiscal balance (including the Oil Fund) moved into surplus in 2000 to 0.4% of GDP, compared with a deficit of 4.8 percent in 1999. This was driven by the sharp increase in oil prices raising nominal GDP, combined with no changes in tax or expenditure policies, leading to an almost doubling in oil-related revenues and a reduction in expenditures as a share of GDP. A consolidated fiscal deficit of 0.5 percent is planned for 2001.
The external balance is improved, with future
FDI inflows covering current account deficits. The current account
deficit in 2000 fell to -2.7% of GDP (from -13.2% in 1999), with a
positive trade balance driven by significantly higher export revenues.
Oil exports more than doubled in dollar terms, while non-oil exports,
in particular cotton, also increased significantly. Oil sector imports
declined due to a temporary slowdown in foreign investment activity.
With expected increases in capital goods and service imports associated
with the major oil and gas projects, the current account deficit is
expected to widen again to –6% in 2001. However, high FDI inflows
should more than cover deficits over the next years. RECENT DEVELOPMENTS IN STRUCTURAL REFORM
Sound guidelines for the management and investment
of Oil Fund assets are established. A Presidential Decree was
issued on policy guidelines to ensure that Oil Fund assets are managed
prudently, that they will not be used for loans or loan guarantees,
and that information about investments based on annual audits will
be made public. The Fund will invest mainly in overseas assets to
preserve mineral wealth for future generations, with only interest
earnings being available to support government expenditures. Although
the Oil Fund and state budgets are not formally integrated, the
authorities have agreed that the Oil Fund and state budgets will
be prepared in close coordination, and expenditures of the Oil Fund
executed through the treasury. The consolidated budget execution
will be published quarterly. Oil Fund-related decisions were an
important element underpinning the recent approval of a new 3-year
IMF program and an upgrade in Azerbaijan’s long-term foreign currency
rating from B+ to BB- (Fitch IBCA).
Structural weaknesses within public finances
are being addressed slowly... Revenues to GDP are low by regional
standards, and there is a large quasi-fiscal deficit in the energy
sector with total tax arrears excluding penalties of 14% of GDP.
Tax and fiscal administration reform should help bolster public
revenues through improved transparency and clarity, notwithstanding
the fact that the 2001 tax code reduces the VAT rate from 20 to
18%. The distortionary provisions allowing double depreciation are
expected to be revised within the 2002 budget. Expenditure management
has been improved, with progress in implementing a single treasury
account and the development of a new expenditure monitoring system.
Regarding the treatment of tax arrears, the authorities issued a
decree granting the Ministry of Finance and the Ministry of Taxes
the authority to oversee the cash flow of the largest taxpaying
state-owned enterprises. SOCAR, the state-owned oil company responsible
for most of the tax arrears, will be given a tax credit for the
quasi-fiscal activities undertaken for the government (including
provision of oil and gas to Azerenergy and Azerigas), which will
be offset against SOCAR’s pre-2001 tax arrears. From 2002, any such
subsidies must be explicitly included in the state budget.
…with a commitment to strengthen the competitiveness
of government debt markets. To keep oil resources for longer-term
development purposes, there has been a shift in deficit financing
in 2000 from reliance on oil bonuses to treasury bills and privatization
receipts. In response to the high cost of t-bill issuance linked
to alleged collusion, the State Committee for Securities (SCS) in
agreement with the Ministry of Finance adopted revised regulations
on the issue, placement and circulation of t-bills. In order to
further improve operations, the authorities are committed to design
a program jointly with SCS, the Azerbaijan National Bank (ANB) and
the Baku Stock Exchange to enhance competition in this market.
A series of measures are being taken to improve
governance, critical to help spur growth in non-oil sectors of the
economy. The private sector remains very concerned about corruption,
the absence of a level playing field for all enterprises and the
sometimes-arbitrary implementation of tax and other regulations.
The authorities have committed to develop a comprehensive anti-corruption
program during 2001. As part of government efforts to enhance governance,
the head of a new Chamber of Accounts has been appointed. As the
government’s supreme audit institution, this body will be given
the authority to audit all government bodies including all extra-budgetary
funds and will be obligated to make public reports of its findings.
In addition, the authorities have begun to implement reforms of
the Cabinet of Ministers, including the merging of former ministries
of State Property, Economy and Trade, and the Antimonopoly and Foreign
Investment Regulatory Committees, into a new Ministry of Economic
Development, and the establishment of new Ministries of Fuel and
Energy, and Ecology and Natural Resources. As part of this reform,
policy-making and regulatory functions will be removed from commercial
state-owned enterprises and both initially transferred to relevant
government ministries. To streamline and improve effectiveness of
the government bureaucracy, a new civil service law was adopted,
together with a selective hiring freeze and substantial selective
wage increases for qualified high-level personnel. To help level
the playing field regarding government purchasing, a revised procurement
law has been submitted to parliament for approval. Medium and large-scale
privatization is re-launched … While small-scale privatization is
nearly complete, privatization of medium- and large-scale enterprises
has lagged. Since the adoption of the second privatization program
in August 2000, 39 cash and 20 voucher auctions have been held to
the end of the first quarter of 2001, with 127 state enterprises
being offered for sale for the first time. In addition, since case-by-case
privatization began in late 1998, ten companies have been privatized
through competitive tenders, including most recently poultry farming,
flour milling, wine production and sporting facilities. However,
in terms of privatization revenues, the progress made to the end
of the first quarter 2001 has been modest: of a total of only $118
million in privatization revenues since 1996, receipts generated
in 2000 and the first quarter of 2001 account for 12% of the total.
More than half this amount is still generated from the outstanding
small-scale privatization. Importantly, official lists of some 450
larger enterprises open for privatization to both foreign and domestic
investors were published end-March 2001, including enterprises of
the telecommunications, fuel and energy, mechanical engineering,
chemical, and fish industries, and the state-owned airline AZAL.
...with additional preparation of major projects
required to ensure success. Although tender results were announced
in March 2001 for a long-term management contract for BAGES, the
Baku electricity distribution network, the completion of the transaction
with the tender winner appears to be plagued by the absence of an
adequate regulatory framework, the poor quality of available information,
as well as, vaguely formulated tender documents. On the other hand,
the tender of the 25-year management contract for Azerbaijan Aluminium,
awarded to the Dutch company Fondel Metal in March, has been finalised.
The foreign company has committed to invest US$ 5 million over 5
years while the government has granted concessions on supplies of
electricity, natural gas and on the transport of raw materials and
equipment until 2005.
Reform of power and gas is urgent both to eliminate
the large quasi-fiscal deficit and to enhance competitiveness of
the whole economy. The quasi-fiscal deficit in the energy sector
was estimated at 13% of GDP in 1999, roughly half from electricity
and half from gas. The deficit originates from: (1) losses in revenues
by SOCAR from below opportunity cost prices for fuel oil and gas
supplied to Azerenergy and Azerigaz; (2) non-payments, with only
44% of gas and 41% of power supply billings collected and several
groups of the population not billed for utilities’ services; and
(3) technical losses, internal use of power supply and theft. Accumulation
of this deficit has many adverse implications including foregone
fiscal revenues, postponed restructuring of enterprises benefiting
from implicit subsidies, excessive energy consumption from distorted
tariffs, deferral of maintenance, and facilitation of corruption
from non-transparent operations. The authorities are developing
a program to resolve these problems. To develop a culture of payments,
the budget provision for utility consumption by budgetary organisations
has been sharply increased, with accountability for not exceeding
budgeted levels of consumption. To foster private participation
and improved metering, management contract tenders for all distribution
networks are planned—though it may be more appropriate to ensure
an appropriate regulatory framework, including cost-recovery tariffs,
in place by then to attract serious strategic investors.
Further reforms in the banking sector are needed
to enable more vigorous private sector development. The banking
system has undergone some further consolidation over the past year,
down from 68 to 53 banks. However, it remains “overbanked” and undercapitalized,
with total manat deposits equivalent to 1.3% of GDP. The privatization
of International Bank of Azerbaijan (IBA, the country’s largest
bank) has been repeatedly delayed and will now most likely take
place in the coming 12 months. The other three state-owned banks
have been restructured by merging the viable parts into a single
bank, the United Universal Bank (UUB), and by transferring non-performing
assets to a collection agency. An important step in that process
was the recent revocation of the license of Agroprom Bank. The completion
of the successful privatization of IBA and UUB remains a major challenge,
as does the consolidation of the sector and the establishment of
a level playing field.
Click
here to view the data summary chart The independent Republic of Azerbaijan has successfully
completed another year of its development in all spheres of social
and political life, including the economy. Macroeconomic indicators
of the country and their analysis are good evidence of this success.
A comprehensive approach to economic process, acting within real
resources, consecutive economic development and other economic reforms
have contributed to macroeconomic stability, development without
inflation, increase in the production of industrial goods and foreign
investment in the country, in 2000.
In 2000, increase in the gross domestic product
(GDP) was 11,4%, reaching its peak during the last five years. GDP
production per capita has increased 10,5% compared with 1999. Since
1999, the shares of real production in GDP have increased from 46,4%
to 48,2%. Production in the leading sphere of the economy, industry,
has increased 6,9% compared with 1999. Increase in the governmental
sector of the industry was 3% and in the non-governmental sector,
it was 12%. In 2000, growth in agriculture was 12,1%, compared with
the year before. Total amount of the investment attracted for the
development of the social and economic spheres grew 2,6%, since
1999. The volume of trade and cash services has grown 9,8% and 5,8%,
respectively. Bank deposits of the citizens have increased 42,8%,
and the rate of inflation in 2000 was 1,8%. In addition, there was
no increase in prices and tariffs. The rate of monthly salary and
revenue per capita has increased 15% and 10,2%, respectively.
It is particularly noteworthy that the share of
the non-governmental sector in GDP has grown from 62% to 67,8%.
This fact proves that the transition to a market economy in Azerbaijan
is going forward. The government has had a positive role in balancing
the economy and implementing the right fiscal and monetary policy.
In 2000, all necessary measures were taken to identify and realize
the main parameters for the fiscal policy. These measures include
both tax and budget expenditures. The Tax Code that was adopted
in 2000 is a positive step towards the regulation of the tax system.
The new Tax Code identifies nine types of tax, which is less than
the number of taxes as stipulated in the previous legislation. The
Tax Code sets a maximum rate of taxes and it is stressed that lower
tax rates are likely to be provided for the next year, under the
Budget Law approved every year. Thereby, it makes the new tax legislation
very advantageous for investors.
Maximum rates for VAT and profit taxes have been
lowered from 20% to 18% and from 30% to 27% respectively. To advance
foreign economic relations, expand entrepreneurship, create an advantageous
environment for production of competitive products and protect the
domestic market, the rate of import duties have been changed for
the year 2001. In 2000, a significant amount of work was done to
implement commitments as a member of international institutions,
carry out economic reforms with international financial institutions
and draw up and performing various cooperation programs. An external
debt limit was set for the purpose of providing external debt service
within the countries resources. All expenditures that are needed
for the cooperation with social, political, and financial institutions
were taken into consideration in the budget and services were provided
at the required level.
The strategy for poverty reduction in Azerbaijan
was prepared together with consultant-experts of financial institutions
and agreed to by the IMF and World Bank. Azerbaijan's international
economic relations have developed since the country's accession
to the Council of Europe. The integration of Azerbaijan with Europe
is going on rapidly. To place Azerbaijan in the world securities
market, significant works have been done to identify financial agents,
explore credits ratings and issue international securities. Restructuring
of government banks is under way. Three banks: Azerbaijan Agriculture-Industrial
Commercial Joint Bank, Industrial Investment Commercial Joint Bank,
and Savings Bank, have already merged into one United Universal
Bank, in which, 100% of shares belong to the Government. It is expected
that this bank will be privatized in the near future.
In 2000, budget revenue forecasts and budget expenditures
grew 27% and 17.2% respectively, compared with 1999. Expenditures
allocated to the sciences increased by 17.7%, to education by 14%,
to health by 9.9% and to social protection and social provision
by 15.5%, to culture, arts, mass media and physical education by
19%. Social protection is regarded as a priority and to increase
expenditures in this area is our strategy. In 2000, the share of
social protection formed 64.2% of virtual expenditures. It is 12%
more than it was in 1999. In accordance with the Decree of the President
of the Republic of Azerbaijan, we managed to increase salaries in
the areas of sciences, education, health and culture.
The fiscal deficit in 2000 was reduced to 1.1%
of GDP and positive works of 2000 are being carried into 2001. Nearly
50 documents have been prepared to be distributed among taxpayers
to educate them about the new Tax Code. Financial aids for the private
sector, including implementations of poverty reduction programs
for children, disabled persons, refugees, and IDPs, hold a great
share in 2001 budget expenditures. A lot of works have been done
to further treasury system development and to increase the role
of treasury bodies in the process of state expenditure management.
In order to implement an effective and successful fiscal policy
in Azerbaijan the following matters should be implemented:
- to adopt a new State Budget Law in order to
improve the process of state budget preparation, adoption, execution
and execution monitoring, and in connection with this, to provide
the preparation of state budget classification and its implementation,
- to properly control the disbursement of budget
funds, to take effective measures in order to decrease the debts
between debtors and creditors, and in general to provide financial
discipline throughout the country,
- to prepare the country's poverty reduction program
in order to tackle this problem in the country,
- to strengthen the activity and cooperation with
external credit beneficiaries in order to enable them to provide
timely payments in respect of guaranteed credits,
- to improve the structure of government and administration
systems,
- to accomplish the task of agriculture sector
development and preparation of a special financing program in this
sphere,
- to prepare the action program in order to continue
non-oil sector development, with the encouragement of small- and
medium-scale entrepreneurship,structural reforms and transition
to a market economy to solve existing unemployment and poverty reduction
problems. Azerbaijan is a country with rich natural resources and
effective and proper use of these resources will help the country
to become a developed state with strong economic prospects. To this
end, comprehensive economic reforms are going on headed by President
Heydar Aliyev and we are confident that all tasks in this respect
will be successfully accomplished.
Azerbaijan was the second largest market for
U.S. exports in the NIS, following Russia in the year 2000. While
the purchase of two large aircraft certainly made a large difference
in the figures, there were also a variety of other exports that impacted
on Azerbaijan's trade with the U.S.
The most significant increase in U.S. exports to
the Caucasus region (and a year-end record) was in trade with Azerbaijan,
valued at $210 million. Commercial aircraft and parts led U.S. exports
to Azerbaijan last year, jumping to $135.4 million and accounting
for 64 percent of total sales. Two Boeing B757-200 aircraft acquired
by Azerbaijan Airlines (AZAL) spurred the growth. The U.S. Export-Import
Bank, in its first-ever transaction in Azerbaijan, provided the
bulk of the financing for this transaction. The aircraft are equipped
with Rolls Royce engines financed by the UK's Export Credit Guarantee
Department, which made for a groundbreaking cooperative scheme in
the way this transaction was realized.
Shipments of oil and gas machinery and parts, mostly
bound for Azerbaijani oilfields, more than tripled last year to
$35.3 million. The purchase of such machinery reflects the inflow
of oil-related earnings and the country's ability to capitalize
on rising world oil prices. U.S. merchandise deliveries of tobacco
products were also significant at $15.6 million.
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