How Will Volatile Oil Prices Affect Azerbaijan's Budget This Year?

The prolonged oil slump that began in mid-2014 has made things complicated for Azerbaijan.

The rapid decrease of oil revenues—the country’s main economic driver for the past 10 years—poses real threats to macroeconomic and financial stability in Azerbaijan. As 2015 began, the national currency fell by 25.7% against the US dollar, increasing tensions in Azerbaijan’s financial sector and currency markets.

Since 2006, Azerbaijan has depended on oil for more than half of its budget revenues. Decreased commodity prices in international markets had an immediate negative impact on budget implementation: budget revenues for end of 2015 fell by 12% and state expenditures dropped by 16% compared to figures primarily approved in last year’s state budget.

On December 21, the national currency was devaluated for the second time. The manat lost 32.3% of its value and the country shifted to a floating exchange rate policy.

As a result, Azerbaijan’s government struggled to fulfil a variety of social and economic promises.

This year’s budget was forged during trying times. In 2015, Support to Economic Initiatives Public Union, a NRGI partner organization in Azerbaijan, parsed this year’s economic policy in a review that looks at potential trends in revenues and expenses. It also evaluates the possible impact of budget policy on economic processes.

The review has been developed in order to boost public participation in state fiscal policy and budget discussions; to improve civil society contributions to the development and implementation of budget policy; and to explain the state budget to a larger community, which is of special importance during times of crisis.

Fidan Bagirova is the Eurasia senior officer with NRGI.