TODAY.AZ / Business

WB proposes fiscal consolidation for Azerbaijan

07 August 2015 [16:53] - TODAY.AZ

/By AzerNews/

By Vusala Abbasova

The World Bank (WB) has suggested a fiscal consolidation to Azerbaijan in an effort to support to strengthen the country's potential in management of the state resources.

This offer was made in the framework of the new 2015-2020 Country Partnership Framework (CPF) for Azerbaijan launched by the World Bank to support the country's path toward sustainable, inclusive and private sector-led growth, that was endorsed on July 22, 2015.

In the current environment of low oil prices, slowdown of oil production and uncertain regional economic prospects, Azerbaijan, which depends on the transfers of the State Oil Fund of Azerbaijan (SOFAZ), is looking for a new growth model in which the private sector will play a central role, according to the World Bank official site.

The CPF focuses on two areas: Public Sector Management and Service Delivery and Economic Competitiveness.

Under the CPF’s first focus area, the World Bank Group will help the country strengthen public resource management, facilitate public service delivery and improve the quality of environmental assets.

Under the second focus area, the World Bank Group will provide support for improving selected infrastructure networks, increasing the country’s financial inclusion, reducing regulatory burden on the private sector, and supporting economic activities in rural areas.

The fiscal consolidation suggests the sustainable and resilient growth, due to new sources (mainly private investment and entrepreneurship), that will be less exposed to oil price volatility and more conducive to creating jobs and supporting greater demographic and geographic inclusion.

The SCD also suggests the strategic use of oil revenues and effective fiscal management that could help the country diversify assets and develop resilient and sustainable sources of growth.

According to the document, the government needs to provide a wide range of areas with reforms, in order to spur private investment. The reforms should provide the friendly business environment, well-regulated markets and the adequate access to long term financing.

All these measures are needed to create a good environment in order to increase the private investment, innovation and entrepreneurship.

The CPF represents a five year joint strategy of the World Bank Group, comprising the International Bank for Reconstruction and Development (IBRD), International Finance Corporation (IFC), and Multilateral Investment Guarantee Agency (MIGA).

The themes of governance and gender are recognized as critical for effective management of resources, social inclusion and accumulation of diversified assets and, as such, will be duly addressed across the whole CPF program.

Azerbaijan has made remarkable progress in reducing poverty and boosting shared prosperity over the past decade, the document said.

The remarkable economic growth during 2002-2013 along with high wage increases and rising employment, were the main contributors to the drop in poverty and the expansion of the middle class.

The economy is now projected to grow on average at 2.3 percent annually over the medium-term, based on lower oil prices and constrained public investment.

Going forward, the oil price per barrel is projected to remain low at $53 for 2015 and $59 for 2016-2017, which reflected a need for fiscal restraint. Public investment is projected to average 10.3 percent of GDP over 2015-2017, leading to lower non-oil sector growth.

Azerbaijan joined the World Bank in 1992 and IFC in 1995. The WB loans to the country have totaled over $3 billion for 55 projects over this period.

Currently, the World Bank investment portfolio in Azerbaijan includes 16 projects with a total commitment of $2 billion.

The IFC has invested more than $365 million in 54 long-term finance projects and mobilized $74 million from other lenders since 1995.

IFC has also supported trade worth about $77 million through its trade finance program, and implemented advisory projects focused on private sector development.

URL: http://www.today.az/news/business/142754.html

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