Azerbaijan in crisis-resistant regime Proceeding from government’s report

Despite the difficult external situation, the global recession and the decline in prices for hydrocarbon raw materials, as well as great inflationary pressure, Azerbaijan successfully changed the socio-economic basis last year.

Azerbaijan’s foreign exchange reserves increased, external debt reduced, defence potential was strengthened, and most importantly, large-scale initiatives to revive the Karabakh region were implemented.

This was outlined in the report on the activity of the Azerbaijani Cabinet of Ministers in 2023, which Prime Minister Ali Asadov has recently delivered at the plenary meeting of the spring session of the Azerbaijani parliament.

The past year turned out to be very difficult for the global economy. The negative effects of recession and high inflation were observed in the EU, the US and even in China. The risks of the collapse of economic bubbles increased.

The ongoing military conflicts in Ukraine and the Middle East, the sanctions confrontation and the breakdown of ties in logistics and supply chains resulted in a decline in trade and demand in the stock markets. This negativity was also felt among Azerbaijan’s main trading partners, without improving business dynamics.

However, despite the external negativity, Azerbaijan was able to implement the basic tasks of changing the domestic economy in 2023 by increasing the competitiveness of the agrarian and industrial sectors and other sectors of the non-oil industry in foreign markets. The projects in “green” energy, digitalization, cybersecurity of the financial sector, etc. were actively developing.

At the same time, the past year was distinguished by large-scale social transformations. The pension and social payments were increased. The digitalisation of the labour market was promoted. The new jobs were also created through self-employment projects, public work within the public-private partnerships.

“The key macroeconomic indicator achieved last year was a decrease in the level of inflation, as well as maintaining the stability of the foreign exchange market,” Asadov has recently said in the parliament while delivering a report on the government’s activity as of 2023.

“Azerbaijan’s foreign exchange reserves increased by 17 per cent or $10 billion and reached $68.5 billion in 2023, the volume of external public debt decreased by 3.5 per cent and amounted to $6.46 billion, or 8.9 per cent of the country’s GDP,” Asadov added.

The mentioned indicators of the ratio of external debt to GDP testify to a healthy financial system in the country, which allows Baku to pursue an independent economic policy.

The high level of gold and foreign exchange reserves of Azerbaijan, which are a reliable buffer in case of a sharp decline in the balance of payments and other global force majeure situations can be pointed out among the factors guaranteeing minimal risks of default.

In general, there was a high level of volatility in prices for hydrocarbon raw materials in 2023, but their average level remained acceptable.

As a result, the budget revenues increased thanks to the good dynamics of non-oil production, exports and effective tax administration.

All this has become a key condition for expanding budget financing of socially important projects and other undertakings of national importance.

Thus, the fourth social package has been adopted upon the president’s initiative since early January 2023 which increased the minimum pension, salaries and other types of social benefits. These measures ensured additional social benefits for about 1.9 million people.

Asadov noted that 478 million manats ($281 million) were allocated in Azerbaijan last year as financial support to agricultural producers for food security, while the validity of tax benefits in the agrarian sector was extended for three more years since January 1, 2024.

Asadov noted that Azerbaijan has improved legislation and the pricing system for medicines.

“The state registration of medicines has been simplified, e-prescriptions have been introduced, and the volume of medicines provided upon compulsory medical insurance are expanding,” he said.

Azerbaijan’s efforts to continue strengthening the Armed Forces, which is extremely important amid the complex geopolitical upheavals occurring near Azerbaijan, are the most important sphere of activity last year.

“About 5.9 billion manats [$3.5 billion] were allocated from the state budget to strengthen the defence capability and national security of the country in 2023, which is 19.6 per cent more than the previous year. This work will continue, and military spending in the coming years will mainly account for the state budget expenditure,” Asadov noted.

The government has outlined large-scale work on mine clearance and the formation of road, energy, utility and residential infrastructure in the Karabakh region as an important long-term goal.

The projects for the reconstruction of liberated territories are implemented mainly through the state funding. Numerous private companies and organisations are involved in this process, which is an important incentive for the development of the non-oil sector of the domestic economy.

“Some 53,100 hectares of territories were cleared of mines in the Azerbaijani territories liberated from occupation in 2023 through the Mine Action Agency of the Azerbaijan Republic, various state and non-state organisations. In general, as of March 1, 2024, 123,000 hectares of lands in the Karabakh region have been cleared of mines and unexploded ordnance,” Asadov said.

He emphasised that this work will be actively implemented in 2024, in particular, it is planned to clear about 60,000 hectares of lands.

Accelerating the process of clearing the territories of Karabakh and East Zangezur from mines is an extremely important task, taking into account the large-scale plans to be implemented for the improvement of the region and the speedy return of former internally displaced people to their native lands.

“The Azerbaijani government estimates the investment needs for the restoration of the liberated territories - Karabakh and East Zangezur - at 32 billion manats [$18 billion] until 2027,” Asadov said.

“Some 12.1 billion manats ($7.1 billion) were allocated from the state budget for these purposes from 2021 to 2023, including 5.6 billion manats ($3.3 billion) in 2023. Four more billion manats ($2.3 billion) will be allocated this year through the state funding,” he added.

The president reminded that as of 2023, 1,186 families (about 4,700 people) of former internally displaced people returned to the territories liberated from occupation, and this year it is planned to resettle 5,171 more families in 25 restored settlements.

Asadov said that as part of the “Great Return” project, 34,500 families, that is, about 140,000 people, will be able to return to their native lands by 2026.

To implement initiatives in the territories liberated from occupation, large-scale construction work is being intensively carried out and measures are being implemented to reintegrate the Karabakh region into the country’s economy.

The master plans for more than 100 cities and villages have been prepared and approved. The construction work has already begun in most of them. Social infrastructure, namely, hospitals, schools, sports facilities, infrastructure facilities, including over 2,000 kilometres of roads and more than 130 tunnels and bridges, is being formed.

The electric power sector is being restored, railways are being built, two international airports have been opened in Fuzuli and Zangilan, and the third one will be opened in Lachin.

In particular, the residential and social infrastructure was intensively built in Aghdam, Shusha, cities and villages of Lachin, Fuzuli and Zangilan districts in 2023. The significant results were achieved in implementing the concept of “smart city” and “smart village”, the creation of modern agricultural industrial clusters, etc.