Finance ministry predicts increase in oil prices

By Aynur Karimova

Azerbaijan's Finance Ministry predicts oil prices in the world markets not to fall below $25.

Finance Minister Samir Sharifov told journalists that the oil price can even increase in the second half of the year.

"Therefore, the oil price in the updated budget-2016 has been set at $25 per barrel," he said while addressing a press conference on January 28.

The minister noted that taking into account the current processes in the world and the falling oil price, which is the main source of Azerbaijan’s income, the government has switched to the saving regime.

"As a result of the measures, we have saved $2.2 billion for SOFAZ (State Oil Fund of the Republic of Azerbaijan)," he said. "As of 2015, the balance of the treasury amounted to 1.4 billion manats ($859 million). We are using this amount while reconsidering the state budget forecasts for 2016."

Energy-rich Azerbaijan, the national economy of which faced challenges caused by drop in oil prices on the world market, is keen on reviewing the economic plans and taking anti-crisis measures to overcome the difficulties.

In this regard, the government plans to revise the state budget and to build the economy based on the oil price of $25-30 per barrel.

No loan talks with IMF, WB

Sharifov went on to add that Azerbaijan isn’t in talks with International Monetary Fund and the World Bank for raising $4 billion in the form of loans.

“Our condition is not so deplorable to ask anyone for a loan in a short period,” he said. “On the contrary, we allocate loans to other countries.”

Sharifov also said the reforms, which Azerbaijan wants to hold, are welcomed by international financial organizations.

“They have stated that they stand ready to help on the matter, as well as financially,” he said. “Here the matter rests in a broad privatization program, improvement of business environment and state administration, and decreasing bureaucracy.”

He added all this is being done for Azerbaijan to be able to create a new model of development that doesn’t depend on oil.

Finance ministry to place bonds

Sharifov also noted that the Finance Ministry begins the placement of bonds in national and foreign currency from February 2016.

He said that the issuance of bonds is partly related to the current situation in the market.

“It should be noted that in connection with the national currency’s devaluation the confidence in manat has fallen,” Sharifov said. “The manat sale and the US dollar purchase have increased. It become difficult to get manats in the banks, because bank assets are mostly in dollars.”

For increasing trust in the manat, the government decided to start issuing bonds.

“We are ready to provide bonds to the market at a high rate,” said the minister.

The ministry also expects to receive 100 million manats ($61.35 million) from the state property privatization in 2016, which will be used to cover the budget deficit.

Sharifov has not ruled out the possibility of drawing more funds from the state property privatization.

Azerbaijan to issue bonds for SGC

According to Sharifov, the Finance Ministry is preparing for holding the road-show bonds for the Southern Gas Corridor on the international market in early February.

“The state bonds are not planned to be placed on the foreign markets in 2016,” he said. “The bonds will be issued in February for implementing the Southern Gas Corridor project.”

"Southern Gas Corridor CJSC will place the bonds,” he said. “This project is of great importance for Azerbaijan. Perhaps, we will deliver a state guarantee for these bonds to raise their interest.”

He said that the company has attracted a financial adviser to finance the project.

"Three bank-managers, namely, Citibank, JP Morgan, Unicredit bank have been chosen for the bond issue,” he said. “The issue volume will amount to $2 billion.”

The Southern Gas Corridor is one of the priority energy projects for the EU. It envisages the transportation of gas from the Caspian Sea region to the European countries through Georgia and Turkey.

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

Concessional financing to be increased

The Azerbaijani government will additionally allocate 70 million manat to the National Entrepreneurship Support Fund under the Ministry of Economy, Sharifov said.

"This has been envisaged in the updated forecasts of the state budget-2016, to be prepared by February," the minister said.

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Aynur Karimova is AzerNews’ staff journalist, follow her on Twitter: @Aynur_Karimova

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