The state support programs for various sectors of the economy, including entrepreneurship, have been developed in accordance with President of Azerbaijan Ilham Aliyev’s decree on a number of measures to reduce the negative impact of coronavirus COVID-19 and, as a result, sharp fluctuations in the global energy and stock markets on the Azerbaijani economy, macroeconomic stability, employment and entrepreneurship.
The Ministry of Economy has disclosed a basic document containing the main directions of these programs, their coverage, and the main tools to support the economic growth and entrepreneurship.
In an interview with Trend, Azerbaijani Deputy Economy Minister Sahib Mammadov spoke about the developed programs.
- Currently, there is a great negative impact of coronavirus on the global economy. What measures are being taken to minimize this impact on the Azerbaijani economy?
Coronavirus has been recently spreading and covering many countries. This not only has a great negative impact on the world economy, but also affects the Azerbaijani economy and everyday socio-economic life.
Azerbaijan, which has the necessary economic and financial opportunities to overcome negative trends in the economy, quickly reacted to the situation, introduced a strict quarantine regime and took measures for social isolation.
The working groups were created upon the presidential decree to reduce the negative impact of the pandemic on the country's economy, macroeconomic stability, employment and entrepreneurship.
The government deliberately reduces economic activity to protect the lives and health of our citizens, supports business entities to protect the economy, the private sector from the crisis and minimize the negative consequences of the crisis.
In this sphere, ensuring of employment, maintaining of the stability of the financial and banking sector and achieving of sustainable economic growth are the main priority spheres.
- Which economic spheres does the state support package cover?
- I would like to stress that as a result of the joint and intensive work of the working group with the relevant structures, we managed to create a support package as soon as possible. Thus, the spheres affected as a result of coronavirus were determined, 10 programs for rendering state support were prepared.
These spheres cover four main sectors and 20 spheres of activity.
The most affected, greatly affected, minimally affected or not affected spheres as a result of coronavirus were determined.
The financial volume of state support programs is 2.5 billion manat ($1.5 billion), which is three percent of Azerbaijan’s GDP. The state support package in such a volume is envisaged neither in the CIS nor in the region compared to the volume of economy.
- Which spheres will be supported within the state support package?
- The state support mechanism will be applied to the entrepreneurs who fulfill the government’s appeal not to cut job places and pay employees within the quarantine regime and restriction of economic activity, as well as preserve job places and salaries.
At the same time, entrepreneurs who conduct business transparently and conclude employment contracts with employees will benefit more from support.
So, the first program covers 44,000 businesses, in which 304,000 employees work.
The program envisages rendering of the state financial support for the payment of a great part of the salaries of these employees.
Currently, 640,000 employees work in the private and non-oil sectors of the economy. The program covers 304,000 people or over 45 percent of those working in these sectors.
In accordance with the estimates, the negative consequences affected 11 spheres of entrepreneurial activity. This is catering, services, tourism, hotels, entertainment, transportation and other spheres. Each citizen employed by the companies operating in these spheres will receive support within the program.
Nine more spheres of business activity, which have been greatly affected, will receive 70 percent support.
The application of the program will be based on the real salary of the employee or the average monthly salary throughout the country.
As of January, the average monthly salary in the country amounted to 712 manat ($418).
In accordance with the program, it is proposed to allocate 50 percent of the monthly salary fund in the form of direct financing of entrepreneurs and enterprises while the average monthly salary is taken as the maximum.
The employee’s need for support differs from the need of the employee receiving a lower salary than the average monthly salary.
The employees getting high salaries work in the least affected or unaffected sectors, namely, finance, banking, insurance and others.
- You have mentioned the issues related to the support for employees. But how will entrepreneurs, that is, employers, get this support?
- In general, support for entrepreneurship is diverse. Thus, the second big program is associated with individual entrepreneurs and covers more than 290,000 micro and individual entrepreneurs.
Restrictions imposed on economic activity primarily affected this sector, and there is more need for support. The base will relate to the tax payments that micro-entrepreneurs made during 2019 and will be based on it.
The third program is related to the tax breaks, vacations and business benefits. The main goal is to protect those sectors and entrepreneurs who are most susceptible to negative impact through benefits and to prevent them from experiencing additional liquidity pressure.
The fourth program is to support the mortgage loans. During the period after coronavirus, the construction sector will become one of the leading ones due to the predictably rapid growth of the economy.
Given the multiplicative effect of this support, the complexity of the sector, the production in our country of a big volume of raw materials further increases the importance of the construction industry. The construction sector is connected both with the social sphere and with the provision of citizens with housing.
Moreover, two programs related to the banking sector were prepared. One of them is a program to support the existing loan portfolio in the amount of 1 billion manat ($588.2 million). This program is important in terms of maintaining the quality of a portfolio of bank loans for entrepreneurs. Another program relates to the newly issued loans. Real sector lending is the government’s priority.
In this regard, in the future it is planned to finance the real sector through banks to ensure its recovery in the banking sector.
After the implementation of the program, 60 percent of new loans issued by banks will be guaranteed by the state. The maximum annual interest rate on such loans must not exceed 15 percent for a period of up to three years. A half of the interest on these loans (7.5 percent out of 15 percent) will be subsidized from the state budget.
Another program is related to supporting the passenger transport sector. Targeted support will be rendered to the entities operating in this sphere such as AZAL, bus, metro and railway companies.
- Does the benefits package include public benefits in the field of utilities and other social issues?
- Among the proposals there is also a program to increase the preferential limit on electricity consumption by the population. As people stay at home due to the quarantine regime, energy consumption has increased.
For the vulnerable layers of the population, this aspect will be taken into account. For such people, an increase in the preferential limit on electricity consumption by 100 kilowatt-hours is envisaged.
Moreover, to support the financial situation of the population, it is planned to allocate funds for a social package (unemployment benefits, social assistance, and others).
A program is also being developed to support the payment of educational costs for students from the families belonging to a socially vulnerable group of the population.
All this is only part of state support. The work on additional support mechanisms, including a social support package, is underway. The measures which are being implemented once again show that Azerbaijan always thinks about its citizens: "Together we are strong".
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