Finance Ministry says “too early” to revise 2018 budget forecasts

The Azerbaijani Finance Ministry does not exclude possibility of revising the country's budget forecasts for 2018, Finance Minister Samir Sharifov told reporters on April 11.

However, according to Sharifov, it is too early to speak about the budget revision.

“The budget legislation provides opportunities to review the forecasts of the state budget. But it is too early to say anything certain,” the minister said.

Revenue part of the state budget for 2018 is forecast to total 20.127 billion manats ($11.76 billion) (including centralized revenues in the amount of 19.473 billion manats ($11.17 billion), local revenues in the amount of 653.353 million manats ($384 million)), while expenditures are expected to amount to 21.047 billion manats ($12 billion) (including centralized expenditures in the amount of 20.323 billion manats, local expenditures in the amount of 723.925 million manats ($425 million)).

Sharifov went on to say that Azerbaijan should continue to pursue an economic policy independent of oil prices.

“Today, Azerbaijan tries to pursue its economic policy in such a way that it does not strongly depend on oil prices. When calculating the state budget of Azerbaijan for 2018, we took the price of oil at a level much lower than its current value. I think that Azerbaijan should continue to pursue such a cautious policy,” he noted.

The price of oil in the state budget of Azerbaijan is set at $45 per barrel.

The minister further spoke about fundamental risks for macroeconomic stability in Azerbaijan, saying there are no such ones.

He made the remarks when commenting on the fluctuations of the national currencies in neighboring countries. Sharifov noted that they will not strongly affect Azerbaijan.

“In case we look from the prism of ensuring the stability of the state budget and macroeconomic stability, then we can say that presently, we don't face fundamental risks,” he said.

The newly-imposed U.S. sanctions negatively affected Russia's ruble. Despite the growth of oil prices, the rate of the ruble to the USD dropped to the most modest value in the last six months. The rate of the ruble to the USD on the Moscow Stock Exchange declined by 3.4 percent, to 60.15 rubles - the minimum since November 2017, while the rate of the ruble to the euro fell by 3.8 percent to 74.08 ruble - the minimum since August 2016.

Furthermore, Iran's currency, the rial, has cheapened by more than 11 percent, and the Turkish lira - by 3.9 percent.

Speaking to journalists, Samir Sharifov also commented on the state guarantee for loans granted for the implementation of the Southern Gas Corridor (SGC) project, saying that they can be replaced.

“The Southern Gas Corridor project is financed by the company specifically created for this purpose - Southern Gas Corridor JSC. To finance the company's share in the consortium, we borrowed loans that were backed by a state guarantee. This is due to the fact that, according to international practice, lending requires a bank guarantee, but since the company was new, the guarantee was given by the state. But after the gas pipeline is fully operational, we can consider replacing state guarantees with private ones,” he added.

Credits issued by various international financial organizations (IFOs) also demonstrate the success of the SGC project, according to the minister.

“IFOs such as the World Bank, the Asian Development Bank, the Asian Infrastructure Investment Bank, the European Bank for Reconstruction and Development, the European Investment Bank have allocated funds for this project. The decision to allocate a loan for the SGC project was also approved by the Multilateral Investment Guarantee Agency (MIGA). At present, JSC continues negotiations on a loan agreement with MIGA,” Sharifov said.

The Southern Gas Corridor, worth $41.5 billion, is considered as one of the priority energy projects for the EU, which strives for diversification of gas supplies. The project envisages the transportation of gas from the Caspian region to the European countries through Georgia and Turkey.

At the initial stage, the gas to be produced as part of Stage 2 of development of Azerbaijan's Shah Deniz field is considered as the main source for the Southern Gas Corridor projects. Other sources can also connect to this project at a later stage.

As part of Stage 2 of the Shah Deniz development, gas will be exported to Turkey and European markets by expanding the South Caucasus Pipeline and the construction of Trans Anatolian Natural Gas Pipeline and Trans Adriatic Pipeline.

The first gas within the Shah Deniz-2 project will be delivered to Turkey in 2018, and to Europe in 2019.