Azerbaijan's parliament, the Milli Majlis, on Tuesday discussed the draft state budget for 2010.
Central Bank Chairman Elman Rustamov told parliament that Azerbaijan has shown good immunity against the global financial crisis in 2009.
Action was taken to avert a drastic decline in the monetary indicators. In the first two quarters of the year the money supply increased by 12%, and AZN 1.4 billion ($1.7bn) was injected into the economy, Rustamov said.
"During the crisis, the Central Bank has supported large enterprises in servicing their external debt. We are currently working on a programme of assistance to private banks," Rustamov told parliament.
He said that despite the crisis the country has resumed mortgage lending to support construction companies. Some 1,400 families have taken out mortgages totaling AZN 61 million ($76 million).
"Most countries were faced with currency devaluation during the crisis. However, the manat dropped by only 0.3% against the US dollar," the central banker said. "It almost remained stable. Overall, the manat gained 1% against the currencies of our trading partners.”
Focus on macro-economic stability, stable exchange rate
He said that the main focus now is tackling the aftermath of the crisis and maintaining liquidity support. He expects 2010 to be a year of low inflation for Azerbaijan.
“Macro-economic stability and the manat exchange rate will be maintained, while great attention will be paid to tackling poverty and other social problems,” Rustamov said.
He said that Azerbaijan's long-term goal is "in the next five to seven years to acquire the status of a country with average yield".
He said that GDP per capita today in Azerbaijan is $7,000.
Inflation
Ziyad Samedzade, chairman of the parliamentary committee for economic policy, told parliament that government forecasts of a 3% inflation rate in 2010 are realistic.
"Certainly, the forecast of inflation for 2010 may be open to discussion, but I think that it is realistic and reflects current processes in the world economy," Samedzade said.
He said the government has recently taken action to reduce inflation. "I think these measures were effective and have helped to cut inflation," he said.
Samedzade said the forecast would create the right conditions for further economic growth in Azerbaijan. "I do not agree with people who think that inflation should be zero. This will hinder economic growth," he said.
In 2008 inflation in Azerbaijan was 20.8% and in the first three quarters of 2009 it was 2.1%.
Revenue
Finance Minister Samir Sharifov told parliament that the draft budget takes account of global trends, oil price forecasts and the outlook from international institutions. Echoing the Central Bank chairman, he said, “Pursuing fiscal and monetary policy to maintain macro-economic stability is one of the priorities of 2010.”
Reductions are planned in some tax rates and the level of income to qualify for simplified taxation is to be raised from AZN 90,000 ($112,164) to AZN 150,000 ($186,823), Sharifov said.
The main sources of revenue in the 2010 draft budget are the State Oil Fund (AZN 4.915 billion - $6.125 bn), VAT (AZN 1.876bn - $2.338bn), corporate profit tax (AZN 1.096bn - $1.336bn), individual income tax (AZN 680 million - $847.458m) and excise tax (AZN 552m - $687.936m).
Of the tax income, 38.4% will come from the oil sector and the rest from other sectors.
Expenditure
Public capital investment accounts for AZN 3.549bn ($4.423bn) in budgetary expenditure.
The draft budget allocates AZN 1,276.8 million ($1,591.2m) to education, AZN 1,205.8m ($1,502.7m) to defence, AZN 1,192.3m ($1,485.2m) to social security, AZN 1,042.3m ($1,298.2m) to general government services, AZN 707.4m ($881.06m) to law-enforcement and the judiciary and AZN 479.4m ($597.09m) to healthcare.
Oil sector
Sevinj Hasanova, deputy minister for economic development, said the budget is based on a conservative forecast of $45 per barrel of oil.
Talking about the macroeconomic indicators, she said that the oil sector is forecast to grow by 8.3% and the non-oil sector by 4.94% in 2010.
Azerbaijan’s oil output is projected to be 53 million tonnes and natural gas 27.2 billion cubic metres with a 7.8% growth in industry.
She added that foreign trade turnover will reach $24 billion in 2010 with a trade surplus of $7.7 billion and a favourable balance of payments of $1 billion.
($1 is worth 0.8029 Azerbaijani New Manats.)