It is very good to be independent and do everything through own efforts, while sometimes there is a need for an advise from abroad. In-time assistance from international organizations with rich experience is of course an important factor for a young and independent country like Azerbaijan.
Refusing from the any form of financial assistance by the International Monetary Fund (IMF) Azerbaijan gives preference to the consultative form of cooperation with this organization. The IMF urges that Azerbaijan is still in need of consultations and following the appeals the IMF will render assistance to Azerbaijan. During one of the last visits of the IMF mission asked for technical assistance in three directions: on improvement of the national accountancy systems, budget classification and management over foreign debts. Azerbaijan has received several recommendations in this respect. Yet its for Azerbaijan whether to accept the consultations as basis.
Foreign debts
The issues concerning the countrys foreign debts always rank as the first for the government. Taking into consideration the experience and role of the IMF in the world finances system, the Azerbaijani Ministry of Finances appealed for technical assistance from the IMF project on management of the public debts in Central Asia and Azerbaijan. An inquire was made by a mission of the project headed by Dariosh Farsimadan, who carried out functional review of a practice of management over debts at the Department of Foreign Economic Relationships of the Finances Ministry. Particularly, the Finances Ministry appealed for assistance in the development of a new structure of the Department, including the clarification of its functions and commitments.
Recommendations provided by the IMF in this respect were very fruitful, as they were developed on the base of best experience of management of public debts in other countries. In compliance with the recommendations, the IMF offers to exclude from the sphere of commitments of the Foreign Debts Management Unit of the Ministry of Foreign Economic Relationships the issues concerning the management of foreign debts, because its employees attach more importance to issue of foreign economic activities, which loads its work schedule. Instead, they should attach more and more attention to analysis of risks n foreign credits, study foreign strategy. In general hey gave a positive estimation, as Azerbaijan has little foreign debt and does not have problem credits posing serious danger. On the other hand, an IMF consultant recommended authorizing the Ministry of Finances in issues concerning the future when Azerbaijan will become a donor country.
Public budget
The IMF was not indifference towards the budget issues and the recommendations, put forward while compiling the public budget, were sometimes of imperative character. Thus, the IMF still considers that the 2006 public budget jeopardizes risk for increase of the level of inflation and warned the government against the reconsideration of the public budget, as sharp increase of the 2006 public budget expenses might lead to double-digit figure. IMF advised to study the impact of big expenses on the macro-politics and take measures with respect to regulate the process and carry out cut in staff if necessary. Increase of the rates and pace of interests is very important for preventing the increase of inflation.
However, the government takes a different position in this respect and urges that the monetary-credit indices enable to apply the anti-inflation measures in the later stage. To reduce the risks the government plans to increase the emission of short-term notes by the NBA and T-bills by the Finances Ministry. In this respect the government forecasts the inflation at the point no more than 8% as of results of the year.
At any case the IMF is ready to hold discussions with the Azerbaijani government on the macro-economic and budget policy in the short-term perspective.
National accounts
Very often an official Azerbaijani statistics was accused of giving incorrect data, which resulted in disagreements with the international organizations, presenting absolutely different figures one and the same indices. In the end both sides turned out right, while the difference in data was explained with different methodology of calculation applied by the IMF and the Azerbaijani statistics.
At any case the difference between these methods of calculation is inconsiderable 0.1-0.2% and the State Statistics Committee refused from the technical assistance inquired earlier for the improvement of the methods of inflation.
At the same time the State Statistics Committee appealed to the IMF for technical assistance on the application of new national accounts for registration of informal economy, improvement of interfiled balance. According to Arif Veliyev, special observation and expert calculation are needed for the calculation of informal economy and a relevant appeal was made to international experts. Again there is disagreement. The State Statistics Committee defined that informal economy in the country comprises 20%, while other sources urge the shadow economy in Azerbaijan is equal to 40-50%.
Monetary policy
Along with the above mentioned the IMF also received an inquiry from Azerbaijan for assistance in the monetary policy. Visiting Baku from 7to 17 Augusta mission of the IMFs Fiscal and Monetary Policy in the composition of a senior economist of the IMF Department, and economists, Rama Seta and Anna Nordstor, were mainly involved in collection of data on the state of the market. Within a month of publication of the results, there will be developed a report on the estimation of macro-economic situation and fiscal markets.
The IMF has approved the tools used by the NBA for the implementation of objectives of the monetary policy and assures only 1 or 2 most efficient tools should be used here. Azerbaijan needs time to see the depth of fiscal market comparable with the situation in the developed economies and the major term is a demand in the development of different segments.
The IMF mission held consultations with the representatives of the Finances Ministry, the NBA, the Baku Stock Exchange, the Baku Interbank Currency Exchange, commercial banks.
Further cooperation
The visit of International Monetary Fund (IMF) mission headed by Deputy Director of EMEA Department Vitaliy Kramarenko to Baku is taking place from August 30 to September. The object of the mission is to discuss the Macro-economic Policy for the remainder of 2006 and lead consultations on the principles of the Macro-economic Policy and the State Budget-2007 Draft the Government showed an interest in regular consultations in the supervision of macro-economic. In this respect IMF executives decided to make reviews as per Article 4 of the IMF Agreement within the mission at least twice a year. One or two assignments may take place, if necessary.
Azerbaijan is ready to repay its debts to the IMF. As of 1 July 2006, the countrys debts to the IMF have comprised $150m under 3 programs (ESAF, EFF and PRGF), or 8.3% of the foreign loan spent by the country in the amount of $1806.3m. Debts to the IMF were estimated to $278.6m, or 7.9% of all debts signed ($3534.1m). In the first half-year of 2006 the Azerbaijani government paid $21m in IMF credits. Repayment of credits will be carried out at the expense of the currency reserves of the country, which are in the disposal of the National Bank of Azerbaijan. The Ministry of Finances said that even in 2007 Azerbaijan fully repay its debts to the IMF. In 2006 Azerbaijan did not repay its debts because of because of absence of necessity for advanced repayment, as the funds bring only 3.5% of annual incomes.