Azernews.Az

The International Monetary Fund (IMF) has predicted inflation in Azerbaijan at 20% in 2008, saying the goal of keeping the figure at single digits cannot be accomplished as early as next year.
"According to our estimates, the inflationary growth rate will not fall below 20% this year unless measures are taken to curtail the increasing state expenditure and to step up flexibility of exchange rates," IMF representative Valeria Fichera told a news conference on the outcomes of the group’s consultations with the Azerbaijani government.
Although macro-economic projections cite 13% inflation in 2008, IMF experts predict that the indicator will be higher.
Fichera said single-digit inflation can be achieved over five years, which she linked with revisiting the state investments program.
The Fund experts recommend that a part of the oil revenues be kept abroad to attain greater results from anti-inflation measures.
Fichera said the organization has submitted to the government a scenario on reducing state spending to 27-30%.
"We expressed concern over the expenditure growth rate, as this boosts inflationary expectations, which, in turn, may pose certain economic risks. We understand the need to raise spending but Azerbaijan’s economy is not ready to master this proposal as yet," the expert said.
Fichera said the government’s intentions on raising 2008 state budget expenses on investments due to rising prices for construction materials were discussed during the meetings with Azerbaijani officials. The measure is also necessitated by the increase in pensions. However, the government’s plans on reconsidering relevant budgetary projections have yet to be clarified.
The IMF mission was to finalize its work on Wednesday. During the visit that started on February 26, discussions focused on Azerbaijan’s macro-economic performance in 2007 as well as the government’s 2008 and mid-term economic policy.
Inflation made up 16.7% in Azerbaijan last year, according to official figures.*