Minister says state budget not to be strongly affected by lower oil prices [PHOTO]

By Ofeliya Afandiyeva

Azerbaijan’s state budget has been formed in such a way that the drop in oil prices does not have a direct, strong impact on the budget of the current year, Azerbaijani Finance Minister Samir Sharifov local media reported on March 13.

This is due to the fact that the state budget revenues are mainly formed in two ways: “One of these is taxes paid by companies operating under production sharing agreements. Others are taxes paid by the State Oil Company of Azerbaijan Republic (SOCAR).”

“SOCAR’s revenues and taxes are generated mainly by products sold in the domestic market. Prices in the domestic market are also stable. We believe that the State Oil Company will acquire projected revenues and meet its tax obligations. The only issue for the company is that it expects a slight decline in sales of crude oil and some oil products abroad,” Sharifov noted.

He mentioned that mostly, the companies operating under production sharing agreements will lose a certain part of their revenues.

“We observe this trend more often, however I would like to point out that there is a special structure for fulfilling tax liabilities. It implies that the liabilities of the fourth quarter of the last year are fulfilled in the first quarter of this year and they have already been paid. Those payments account for 40 percent of the yearly forecast. Thus, according to our estimates, even if the market prices are set in a range between $30 and $35, its impact on oil revenues will be around $270-$340 million based on our oil revenues from both SOCAR and production sharing agreements. The envisaged budget revenue is at the level of $ 14,225,822,303. That’s to say, it will account for 1.1-1.4 percent of the budget revenues, which is not a big amount,” said the minister.

Moreover, Sharifov added that the fiscal authorities of the country - State Tax Service ($ 106,101,269) and the State Customs Committee ($ 43,619,410), have fulfilled their forecasted payments ($ 149,720,688) in the first two months of the current year.

“In other words, here we have a certain "air bag" due to extra payments as well. However, we have predicted, reviewed these issues and regard that we are not having a great impact here,” he stressed.

“The other source of our budget revenues is, of course, the State Oil Fund. Specific weight of transfers from the State Oil Fund is 47 percent and is projected to reach $6,690,274,288 this year. We believe that this transfer will also be fully implemented. We do not see any problem for that”, the minister added.

Sharifov also spoke about the ongoing trade war between states and the influence of coronavirus on Azerbaijan’s state budget:  “I hope that the trade war on goods will probably end soon, and that its completion will be followed by some agreement. As a result, the situation in the world oil markets and oil prices will stabilize. There are both sellers and buyers in the oil market and both parties are interested in not losing in the competition. Therefore, much work will depend on price adjustment. I hope this process will not last long.”

Sharifov said that the situation around the COVID-19 pandemic will negatively affect economy worldwide: “The number of flights has declined. Due to the fact that major airline companies are practically not operating, they suffer great losses. Furthermore, other correlated sectors also suffer.”

The minister added that in line with President Ilham Aliyev’s instructions, the government will provide certain support to the entrepreneurs of those sectors which were most negatively affected by coronavirus and there are now proposals being developed covering ways to offer this support.

“Certainly, we are taking all of these into consideration when assessing the state budget revenues and when implementing the budget. However, I would like to note with full confidence that today all budget payments are being executed. On the eve of the Novruz holidays all salaries, social benefits, pensions are being paid and will be paid on time - there are no problems with this. Expenditures related to the state’s liabilities are being paid in full, as well as approved investment projects. However, given the overall situation, we can look at the priorities and economic expediency. There is no doubt that amid reduced departures from the country, travel expenses of budget organizations will be reduced. Restrictions regarding some events are also expected. The savings in certain expenditures will be allocated to support other spheres,” the finance minister highlighted.

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