Azerbaijan: Adjusting state budget to oil prices

Vugar Bayramov, Center for Economic and Social Development (Azerbaijan, Baku)

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The decrease in the oil prices urged the government to adjust the budget accordingly and to start the economic reforms within the country. One of such improvements has its first success as a new railway rout was launched. Meanwhile the foreign agenda of the month was dominated by the Eastern Partnership summit.

Domestic Policy. Increase in government agencies dynamics and parliament activities

The productivity of several governmental agencies and the parliament of Azerbaijan has been high this November. The 2018 national budget process was accompanied by an intensified public dialogue about the issue, as well as the economic reforms, salaries, the oil income role in the national economy and the oil income transfers to the budget. The most interesting moments were connected with a demand of some PMs to raise their and other parliament workers’ salaries.  Additionally, the President of Azerbaijan fired his numerous high-ranking advisors.

Both cases, unseen in previous years, piqued the public interest and demonstrated the structural changes in the political landscape of Azerbaijan. The economic reforms started after the devaluation of the national currency transformed into the new dynamics in the political decision-making institutions.

Economy. Baku–Tbilisi–Kars railway gains its momentum

The long-awaited Baku-Tbilisi-Kars railway, a transport route creating additional freight and passenger links between Europe and China, was launched in October. As expected, already in November, it created the additional momentum to increase the cooperation between Azerbaijan, Georgia and Turkey. Right after the project launch, the Iranian Minister of Roads and Urban Development Abbas Ahmad Akhoundi proposed to prolong the railway to Tabriz, a city in the Western-Azerbaijan province of Iran.

The economic reforms started after the devaluation of the national currency transformed into the new dynamics in the political decision-making institutions.

Afghanistan also expressed its interest in the project. The Minister of Finance of the Islamic Republic of Afghanistan Eklil Ahmad Hakimi in his interview highlighted   that the rout can connect Afghanistan with the European countries.  The Afghanistan’s participation in the project was also discussed during the European Union’s Special Envoy for the Afghanistan Ambassador Roland Cobia’s visit to Azerbaijan. In 2009-2013 the Ambassador Cobia was the EU ambassador to Azerbaijan too.

These cases are positive indicators for Azerbaijan. Following the decline of the oil prices, the country tried to diversify its economy and boost the non-oil sectors, especially transport, in order to become a regional railway hub.

Foreign policy. “The best” EaP Summit

The President of Azerbaijan Ilham Aliyev attended the European Union`s Eastern Partnership summit in Brussels. Unfortunately, since the text of the Association Agreement between Azerbaijan and the EU was not fully agreed, it was not signed.

Nevertheless, in the post-summit meetings with the EU officials in Azerbaijan, the President Aliyev labelled this summit as a “success”, emphasizing the importance of the declaration adopted.

The Ambassador of Azerbaijan to the EU and Belgium Fuad Isgandarov commented on the summit, calling it the “best Eastern Partnership summit for Azerbaijan”.

As a result, Azerbaijan is pleased with the support of the EU for the territorial integrity of all of its partner countries as stated in the final document of the fifth Eastern Partnership summit. Also the agreement on the Trans-European Transport Network and softened visa regulation with some EU member states are among the positive moments between the sides. Azerbaijan and the EU agreed on the continuation of their negotiations on the base Agreement, which is a high point in the EU–Azerbaijan relations in the last few years.