President of the Republic of Azerbaijan Ilham Aliyev has chaired a meeting on the socio-economic area.
Addressing the meeting, President Ilham Aliyev said:
- The tasks we set ourselves at the beginning of the year are being fulfilled, our country is developing steadily, and major infrastructure projects are being implemented. The overall economic situation is very positive, which is confirmed by figures.
In the first six months of this year, our economy grew by 2.4 percent and the non-oil sector by 3.2 percent. The most gratifying indicator is associated with the non-oil industry. The growth here constitutes 15.7 percent. This indicates that our industrialization policy of recent years has been producing excellent results. The non-oil sector is progressing at a record pace. Of course, the role of large enterprises commissioned in this area this year is quite large. As you know, the carbamide plant and the SOCAR-Polymer plant have been put into operation, and their production volumes are fairly large. At the same time, necessary steps are being taken to develop small and medium-sized businesses. Therefore, the 15.7-percent growth of our non-oil industry in the first six months of the year is very gratifying, of course.
A record figure has also been achieved in agriculture. In the first six months of the year, agriculture has increased by 13 percent, mainly due to crop production, where growth constitutes 25 percent. This means that the investments we have made, the reforms we have carried out, the subsidies we have provided and the scientific approach to agriculture are producing results. I am sure that agriculture will develop steadily in the coming years, thus leading to an increase both in employment and agricultural exports.
Our trade has grown sufficiently as well – by more than 20 percent. Non-oil exports have increased by 15 percent. Over six months, more than $6 billion has been invested in the country's economy. Much of this investment has been made in the non-oil sector. Inflation is only at 2.5 percent. This is also a good indicator. Incomes of the population have increased by 6.6 percent. Budget revenues from the Ministry of Taxes and the State Customs Committee have increased by more than 440 million manats, i.e. this was collected in addition to the plan, which is further manifestation of the ongoing reforms.
In short, all economic indicators give grounds to say that we are developing in the right direction and fulfilling all the tasks ahead of.
As you know, a very large social package was approved at the beginning of this year, and these social initiatives cover more than 4 million people. Very important steps were taken – the minimum wage and the minimum pension were significantly increased: first by 40 percent and then by a further 40 percent which will be paid from September. The minimum wage has almost doubled from 130 to 250 manats. The minimum pension has been raised from 116 to 200 manats. This is also a significant increase, which, of course, requires large financial resources. We can say that we are channeling the entire amount of additional income into the social sphere because this is a priority area for us. It has always been in the spotlight, which is still the case today. The well-being of the Azerbaijani people, their standard of living are always in our focus, and we are trying to solve these issues whenever possible. I should also note that the implementation of this social package requires major financial resources. We can add here the social benefits, which have also been almost doubled. The allowance paid to internally displaced persons has been increased by 50 percent, the problem associated with problem loans has been resolved, other social initiatives have been put forward, which once again testifies to the social orientation of our policy.
Minister of Labor and Social Protection of the Population Sahil Babayev will now report on the work done in connection with the implementation of this program and initiatives.
Minister Sahil Babayev said:
- Dear Mr. President.
At the beginning of the year, you stated that this year would be special from the point of view of social development. And indeed, two major packages of social reforms were adopted on your initiative. The first package of social reforms covered 3 million of our citizens and the total annual financial demand amounted to 1.6 billion manats. This package of social reforms has now been fully implemented, as pensions and salaries of working citizens have been increased. All preparations for the second social package have already been completed – starting from 1 September to bring the minimum wage to 250 manats, increase the wages of an additional 400,000 people employed in the public sector by 20-50 percent depending on their category, and starting from 1 October increase pensions of 750,000 pensioners. In general, the total value of both packages is 2.3 billion manats for the current year and 3 billion manats for next year. They will cover 4.2 million of our citizens. As a result of almost doubling the minimum wage and increasing the minimum pension by 72 percent, the minimum pension in Azerbaijan will be first in the CIS in terms of the purchasing capacity. The minimum wage will be second in the CIS in terms of the purchasing power.
In addition, the work done on your instructions on increasing benefits and scholarships has covered a total of 1.3 million of our citizens, including more than 300,000 persons with disabilities, about 500,000 internally displaced persons, and over 100,000 students and young people. In general, these allowances and scholarships covered the most socially vulnerable part of the population, whose income has been significantly increased.
As a result of another social initiative of yours, the changes introduced to the legislation at the end of last year, a serious amnesty for social insurance was announced in our country, and 25-year insurance experience was applied in relation to those who paid even insignificant social insurance fees from 2006 to 2018. As a result, automatic appointment of pensions began on 1 January. It now covers 13,000 people. They have been given pension in the most efficient and fast way, saving them the need to go to different instances and file applications. As a continuation of this policy and in order to ensure transparency and efficiency in this area, 80 percent of our citizens who retired during the year will be covered as well. Other automation measures will be continued. Upon completion of the automation measures in the assignment of benefits and pensions for the current year, 180,000 applications will be fully granted without the need to go to different authorities.
President Ilham Aliyev: What is being done in connection with the self-employment program? At the beginning of the year we planned that it would cover about 7,000 people, but life shows that this figure is increasing, and so are the needs. In other words, what has been done in this area and how much will the scope of the program expand?
Minister Sahil Babayev: Mr. President, on your instructions we were able to reach out to 6,000 families last year. They were provided with assets to start micro and small businesses. On to your instructions, a corresponding change was made to the budget of the Unemployment Insurance Fund this year, and as a result of raising additional funds this year, we plan to cover 10,000 families by the self-employment program. There are many applications, the population shows a great interest in the program and approves it. Over six months of this year, about 45,000 applications have been received. With this in mind, preference is being given to those in the queue since last year, and among those who applied this year to people with disabilities, displaced persons, martyr families and others belonging to the sensitive category of the population. This year, 4,000 people have already been trained and 1,100 people have acquired assets. In addition, the United Nations Development Program has been involved in the project. About 1,000 families will be provided by the United Nations Development Program. On your instructions, discussions with the World Bank are being completed. In September, the World Bank will submit a project proposal to the Government of Azerbaijan and join this project next year. In general, the initial indicators of the project are very positive. Of course, it is possible to examine the results of the final monitoring for a two-year period, but the figures for the first six months show that the population approves of this program and makes serious use of this mechanism.
President Ilham Aliyev: Yes, we also discussed these issues with international financial institutions. At the beginning of this year, discussions were held with the World Bank, and we invited them to participate in this program. The participation of the World Bank in this program will certainly give us additional financial resources.
What can you say about the activities of the DOST center opened in May?
Minister Sahil Babayev: Mr. President, the DOST center opened with your participation has earned great popularity. Over more than two months, 20,000 of our citizens have applied to this center. Every applicant evaluates the level of service provide in an electronic manner. To date, the level of complete satisfaction of our citizens exceeds 93 percent, while another 4 percent of citizens are partially satisfied. We will strive to maintain this indicator on a permanent basis. Today, the DOST center provides a total of 126 services. In accordance with your instructions, serious work is under way to open another center by the end of the year. Work is under way to open three other centers. We believe that by the end of the year and the first quarter of next year, these three centers will be opened, so we will cover 80 percent of Baku. After the opening of another center at the next stage, the city of Baku will be fully covered. Work on the opening of DOST centers will begin in our regions as well. One of the mechanisms of DOST center, the DOST concept is to provide electronic and online services. A modern call-center has been set up there. From the number of calls coming from our citizens and their satisfaction level, it is clear that many receive services through the call-center, and it is actually not necessary to come to the center. We are sure that the DOST center, which is yet another initiative of yours, will become the brand of Azerbaijan.
In May, Baku hosted the European Forum of the International Social Security Agency, as heads of social welfare agencies from 55 countries visited the DOST center. Their initial assessment was also very high. We believe that, having expanded in a short time, this network will cover the entire country.
President Ilham Aliyev: At the beginning of this year, the fourth state program on the socioeconomic development of the regions was adopted. This is a large-scale program. Despite the fact that a lot of work has been done in relation to infrastructure projects in recent years, the implementation of this program will result in the solution of the so far outstanding issues. As you know, this is a priority area for us. A lot has been done and there are excellent results in the field of electricity, gas and drinking water supply, in the implementation of irrigation projects. Thus, the level of gasification in Azerbaijan is approaching 96 percent. Only a handful of countries have carried out gasification in such volumes. Large generation capacities have been created in the field of electricity, and from this point of view, Azerbaijan is among leading countries because we have ensured our energy security. This year, as a result of reconstruction work to be carried out at existing stations, additional generation capacity will be obtained. Drinking water projects are being implemented in all our regions, and this year the problem of drinking water will also be resolved in several cities. This area is receiving a great deal of attention. Irrigation of about 100,000 hectares of land is improving every year or water lines are being extended to previously non-irrigated lands. This is also a very important issue, and additional steps will be taken in connection with that.
Minister of Economy Shahin Mustafayev now has the floor to talk about the main indicators of the Program being implemented since the beginning of the year.
Minister Shahin Mustafayev said:
- Dear Mr. President, indeed, since 2004 you have been paying great attention to the socioeconomic development of the regions of the country, and one of the main areas of your socioeconomic development strategy is precisely the balanced and sustainable development of the regions.
As you have noted, the implementation of the fourth state program on the socioeconomic development of regions, which you approved at the beginning of this year, has already begun. Three state programs were successfully implemented, and the execution of state programs ultimately aimed at improving the well-being of the population has dramatically changed the face of the regions of Azerbaijan in the true sense of the word. The current situation of the regions is fundamentally different from 15 years ago. The programs you adopted have played an exceptional role in this development.
The implementation of the fourth program you approved at the beginning of this year successfully continues. A significant part of the funds provided for in the state investment program is primarily aimed at implementing infrastructure projects, which form the main focus of this program. At the same time, this program is producing very serious results in raising the level of public services, improving the infrastructure of the regions and upgrading the social infrastructure. In addition, the implementation of the state program is one of the important steps aimed at providing employment, including the rural areas. We can already say today that the business environment created in the regions, the infrastructure for the development of agriculture and industry are bearing fruit and playing a major role in providing employment in the regions.
I would like to briefly inform you about the nine industrial estates and quarters created in the regions. A total of 78 residents have already been registered with industrial estates and quarters, and 45 residents have begun operations. Of the envisaged investment in the amount of 6.4 billion manats, 5.7 billion manats have actually been invested. As a result of the implementation of these projects, more than 11,000 new jobs have been created. At the same time, as a result of the implementation of these projects, products worth 1.5 billion manats have already been produced, and products worth 300 million manats are intended for export.
In addition, on your instructions related to the creation of jobs and provision of employment in the regions, serious work is under way to create agricultural estates and large-scale farms necessary for agriculture. In accordance with your instructions, serious steps have been taken to create 51 agricultural estates. The results are already there. Twenty-two agricultural estates are actually in operation; we expect that another 11 estates to start operating by the end of this year. As a result of the implementation of these projects, additional investments in the amount of 2.4 billion manats will be made in the country's economy. Also, as a result of these projects, more than 4,000 jobs will be created.
Work under way on investment promotion also have a positive effect on the development of the regions. The investment promotion mechanism is producing good results. Up to now, a total of 400 projects have been encouraged, as a result of which 3.4 billion manats has been invested in the country's economy. As a result, more than 16,000 new jobs has already been created.
It is clear that the key prerequisite for the business environment is the presence of modern infrastructure. From this point of view, the continued implementation of the infrastructure projects you mentioned is one of the main objectives of the regional development program. As you noted, electricity and gas supply, the construction of roads, in particular, rural roads, and the work carried out in this area on your instructions in recent years have really profoundly changed the situation in the regions. In rural areas, most of the old roads have already been renovated and improved. This had a positive impact on improving the well-being of the population and on the development of the economy.
You have noted the work carried out in the field of land reclamation. Thousands of kilometers of collector-drainage systems are being cleaned, sub-artesian wells are being drilled and leased to the population. At the same time, you are paying serious attention to this program every year by personally approving it. You personally exercise control over the location of these wells in the villages, and there are excellent results.
I would like to emphasize the work carried out in the social sphere. Mr. President, one of the key objectives of the programs on socioeconomic development of the regions has been precisely the implementation of projects in the social sphere. A large amount of work has also been done in this area, as more than 3,000 schools have been built or overhauled. For two years now, there has been a new approach – the construction of modular schools has begun. This, first of all, applied to rural schools located in small villages in remote regions. This program is also being successfully implemented. I want to assure you that all the work envisaged in the program will be completed.
Mr. President, I also wanted to mention that the implementation of all measures envisaged in the program is under control. This control indicates that all of the planned work will be completed with high quality and at the time you set.
President Ilham Aliyev: Very serious steps have been taken to improve the business environment. As part of the World Bank’s “Doing Business” program, Azerbaijan is recognized as one of the top 10 reformist countries, and we, having advanced by 32 steps, are currently in 25th place. Of course, this plays and will play a positive role in attracting investment to Azerbaijan. All of the leading international financial institutions appreciate our activities in this area.
As for infrastructure projects, of course, many of them have been implemented. Those related to the social infrastructure will be implemented this year. Dozens of schools will be built, central hospitals will be built or overhauled in 10 cities. Olympic centers – the opening of three Olympic centers is on the agenda and is already open. There are specific programs and plans to implement other social infrastructure projects, and this is reflected in our state investment program.
The volume of loans provided on concessional terms this year was at 170 million manats. How much of these has been fulfilled? What is the current situation?
Minister Shahin Mustafayev: Over the first six months of this year, entrepreneurs have been allocated up to 50 million manats in preferential loans. In the second half of the year, preferential loans in the amount of 120 million manats will be provided. Projects have already been accepted and reviewed and ready-made projects have been identified.
President Ilham Aliyev: Road construction has gained momentum in Azerbaijan. Over the past 15 years, we have built 15,000 kilometers of roads. The construction of rural roads and highways is planned on for this year as well. There are plans to build about a thousand kilometers of roads. According to my data, about 400 kilometers of roads have been built in six months. It is possible to say that this has led to the complete renewal of the road infrastructure in Azerbaijan. It is no coincidence that the Davos World Economic Forum’s report ranks Azerbaijan in 34th place in the world in terms of the quality of roads. I am sure that we advance to an even higher place because major investments are being made and will continue to be made in this area.
As I have already noted, our budget revenues are growing. At the same time, foreign exchange reserves are growing and have reached a record high of $49 billion. This is our great asset and a great success. In six months of this year, our foreign exchange reserves have increased by $4 billion. We are using these funds very economically. That is why we saved and increased our foreign exchange reserves even in the years of crisis, when the oil price was low. The goal was precisely to increase foreign exchange reserves every year. In parallel, we have managed to significantly reduce our external public debt. Over the year, our foreign debt has declined by 4 percent and is now at around 19 percent. This is considered to be one of the best indicators on a global scale, as in some countries the external public debt exceeds or is equal to the gross domestic product. We have it at 19 percent. We must continue to be very careful in this matter. Loans can only be obtained for projects of strategic importance, because we have our own internal capabilities and must use them.
As I have already noted, inflation is 2.5 percent. This is a good indicator. The manat rate is stable. The Chairman of the Board of the Central Bank, Elman Rustamov, now has the floor to speak about the macroeconomic situation, the work done in this area and further plans.
Chairman of the Board of the Central Bank Elman Rustamov said:
- Thank you, Mr. President.
In general, the country's macroeconomic stability consists in the equilibrium between its foreign trade and domestic financial balance sheets. It depends on that. As you have already noted, in favorable conditions Azerbaijan’s foreign trade balance is in surplus of $2.9 billion. Our external balance of payments is also in surplus. In general, this year, as you have already mentioned, our exports have increased by more than 15 percent. However, it is encouraging that non-oil exports no longer lag behind total exports. They have also increased by 15 percent and exceed the value of non-oil imports.
Since the beginning of the year, the price of oil has risen to 20 percent and now constitutes $66. This is $6 more than our forecast in domestic, or budget and socioeconomic forecasts. As you have already noted, our strategic foreign exchange reserves have grown significantly in recent years. We are confidently moving towards restoring the pre-crisis level as a whole. Forty-nine billion dollars is more than our gross domestic product. This demonstrates both high international purchasing power and high financial security of Azerbaijan.
Foreign exchange reserves and the Central Bank proper are also growing. This year we have increased our foreign exchange reserves by more than $330 million. However, I want to draw your attention to the issue you have raised – improving the efficiency of foreign exchange reserves management is extremely important. We received over $100 million of these funds from external management over the first six months even though the situation in international financial markets is rather complicated and interest rates are low. We expect to complete the year with an income of 3.2 percent.
In general, the rate of the manat, as you noted, is stable and continues to remain stable. The positive external balance, the work being carried out to diversify exports and expand the supply of currency, as well as positive expectations in the market, have created a significant surplus in the domestic exchange market. I reported to you about this earlier. In general, along with the sterilization of the Central Bank, there is a surplus in the domestic exchange market today, which exceed $1 billion. This, in general, guarantees not only current but also future stability of the manat.
Despite the stability of the exchange rate, we monitor our external competitiveness with partner countries, with trading partners. For the first six months, the real rate of the manat has dropped by 1.2 percent.
Inflation within the target range is below both the government’s and the Central Bank’s objectives. Despite the adoption, as you have already noted, of unprecedented social measures, strengthening of the social policy, expansion of domestic needs and the overall improvement of governance, the measures being taken and the stability of the manat precondition a low level of inflation.
Inflation expectations play an extremely important role in managing inflation. Together with the State Committee on Statistics, we have conducted surveys in more than 4,000 families. In general, the number of people who expect inflation to accelerate by the end of the year is 2 percent. That is, 98 percent of the population does not believe in inflation getting higher by the end of the year. There is also strong faith in macroeconomic stability in general and the dynamics of inflation in business – we have conducted surveys there as well.
In the circumstances of low inflation in general, the Central Bank is taking steps against the backdrop of a consistent easing of monetary and credit policies. Since 2018, we have reduced the rate of discount from 18 to 8.25 percent today. Another direction of monetary policies is the quantitative easing as a whole, i.e. the amount of money we provide to the economy. This year it stands at 9 percent. However, Mr. President, over the past two years our main indicator, which is called the monetary base, has increased by more than 37 percent. This is also being done to revive the economy as a whole, increase the credit activity in the conditions of low inflation, so that banks have enough of their own resources and can use these funds.
We are witnessing a decline in rates of discount in the economy, despite the fact that high consumer loans that form a common fund have an interest. However, business loans, the average interest rate of recently granted business loans has declined in the current year by more than 5 percent and now stands at 11 percent. This indicator is close to our rate of discount. It indicates that the rate of discount, the interest rate policy of the Central Bank have started to play an important part also in the formation of population contributions to business loans.
De-dollarization – we had dollarization during the crisis. Today we see that dollarization has begun to decline. The dollarization of deposits of individuals has decreased from a peak 85 percent in 2016 to 56 percent. The dollarization of loans has decreased from 52 to 35 percent.
Credit activity continues. Over the first six months of this year, loans have increased by 3.6 percent. However, there has been an increase of more than 9 percent on consumer loans. Business loans and loans in the real sector have declined slightly – by 0.3 percent. I think that we should be attentive. We should closely monitor the growth of consumer loans. In general, we must track both the increase in the debt burden of the population and its approach to 50 percent in the portfolio of the banking sector, because this may create certain problems in the future.
Today, there is considerable liquidity in the banking sector. At the same time, we see that business loans are not growing. Apparently, it is necessary to take comprehensive regulatory and stimulating measures so that these loans as a whole flow into the real sector and support the process of domestic investment in the country.
On your decree and on your initiative, the process of compensation for foreign currency loans to people affected during the depreciation period has been fully completed. These funds have been paid to the population. Preparatory work for restructuring manat loans has been completed. In the near future, we, together with the relevant bodies, will ensure payment of these funds to the population.
Economic growth, as already mentioned here, is stable. In general, overall economic growth has been continuing for six quarters and economic growth in the non-oil sector for 10 quarters. This demonstrates its resilience. Mr. President, the task before us until the end of the year is to preserve and develop macroeconomic stability. We must provide it. The second stage of the social package envisaged under your decree will begin in September. In general, we consider this not only a social package, but also a factor in the new model of economic growth, because the revitalization of domestic needs of the population will support the revival of domestic production and export diversification. However, our most important task is to support these social programs, the process of increasing real incomes of the population, and to achieve low inflation. This requires well-coordinated work of the Central Bank with the government. We regularly discuss these issues in the Financial Stability Council. We believe that we can achieve this.
President Ilham Aliyev: I have declared the figure on budget revenues. Funds in the amount of more than 440 million manats have been received from the Ministry of Taxes and the Customs Committee. I think that we will follow this path until the end of the year. It is difficult to provide a forecast now, but I think that approximately 700-800 million manats is expected above the plan.
Minister of Taxes Mikayil Jabbarov said:
- Dear Mr. President, let me briefly report on the current situation. In six months, the Ministry of Taxes provided current revenues to the consolidated budget, which amounted to 4 billion 954 million manats. Of these, 3 billion 633 million manats are tax and state duties, and 1 billion 321 million manats are contributions for compulsory social insurance and unemployment insurance. These figures constitute 108.8 percent for taxes, 112.5 and 116 percent for compulsory social insurance and unemployment insurance respectively. We are confident that we will maintain this pace, as we work closely with our esteemed colleagues. According to our data, in six months the State Customs Committee also achieved a forecast of 108 percent. The main factors that underlie these results are primarily the tax policy, as well as the administration and reforms carried out under your leadership. Secondly, all this is due to close interaction and teamwork with relevant bodies, the exchange of information. Thirdly, we have changed the nature of relations with taxpayers and, finally, we have achieved success in combating the shadow economy, including the withdrawal of the turnover and jobs from the shadow.
With your permission, I would like to draw your attention to certain trends of particular interest. Thus, the share of the non-oil sector in tax revenues has reached 70.1 percent. This is significantly more than 65.8 percent in 2018. In general, the growth rate of revenues in the non-oil sector amounts to 14.3 percent. This exceeds the growth rate of the relevant sector of the economy, and we have already fulfilled the annual forecast by 51.1 percent. The share of the private sector in the non-oil sector is very high – it accounts for 77 percent. As a result of tax reforms, there is a significant increase in the number of employment agreements. In the first six months, 101,000 new employment agreements have been registered, including 77,000 in the private non-oil sector. This is the direct result of reforms on tax breaks carried out on your instructions. I would also like to note that in six months the amount remaining at the disposal of our citizens only from tax benefits amounts to 150 million manats. In previous years, it was paid in the form of tax. This process continues. The data as of today suggests that in July this process continues at the same pace. There is an increase in the number of active facilities – 14 percent, while the increase in the number of value added tax payers amounts to 40 percent.
In conclusion, I want to emphasize the reduction of tax control measures. In particular, the number of field tax audits has decreased in comparison with 2018 by 2.7 times and in comparison with 2017 six times. It is gratifying that we always try to keep track of the private sector under the influence of the economy, tax policy and administration in general. I want to bring to your attention the residual amounts in the private sector accounts in the banking system in Azerbaijani manats. During the year, they have increased by 49 percent and since the beginning of the year by 20 percent. We believe that this is an indicator of the transition of business from cash payments to transactions, as well as confidence in the country's economy.
President Ilham Aliyev: What is the situation with budget execution like? Samir Sharifov, please provide brief information.
Finance Minister Samir Sharifov said:
- Mr. President, state budget performance indicators for six months of 2019 confirm the dynamic processes occurring in the country's economy. Thus, the state budget expenditures have been executed at the level of 100.2 percent - 10 billion 951 million manats. State budget revenues have been executed in the amount of 10 billion 406 million manats. State budget expenditures have been exceeded. I must say, as you have already noted, Mr. President, that the bodies mainly contributing to the state budget, i.e. the Ministry of Taxes and the State Customs Committee, have fulfilled the forecast by 108 percent. These are very good indicators. One of the good figures from the Ministry of Taxes is that non-oil revenues have accounted for 70 percent of tax revenues. The situation in other incomes, i.e. out-of-budget revenues, is also reassuring, although these have been slightly lower than we expected. We do hope that the situation will fully recover by the end of the year.
Mr. President, I would like to particularly touch upon some issues. I believe that one of the most important aspects in ensuring the collection of tax and customs duties lies in the harmonious execution of our expenditures on public investment. I must note that in the first six months of the current year, 37 percent of our expenses on public investment in the amount of 5 billion 980 million manats has so far been executed. There are a number of objective reasons for that. This is due to the fact that this amount provides for approximately 1 billion 140 million manats in loans. The utilization ratio of that, unfortunately, is not very high. We believe that relevant agencies involved in the execution of these loans should speed up work in this direction. Certain cases, of course, depend not only on them. There are certain purchase-and-sale procedures international financial institutions should follow. These also require a certain time. In some cases, it is necessary to take measures in accordance with the legislation on public procurement in Azerbaijan. We believe that as a result of delays, there is a certain lag in state budget funds, mainly in the implementation of infrastructure projects. This is the matter for our tax and customs authorities. Ultimately, this may create certain obstacles in the execution of the forecast on state budget revenues and expenditures for us. Therefore, we are trying to ensure that state budget expenditures are executed harmoniously, and a significant part of the expenditures does not fall on the end of the year – November-December.
The execution of the state budget is being fully ensured. This also includes full funding of the program on social initiatives you have adopted. Relevant agencies have quickly ensured the implementation of your very humane decision on loans.
Mr. President, all obligations relating to public debt are being met. The medium- and long-term public debt management strategy you have approved is being implemented in full. As you have already noted, we have achieved a reduction in the level of debt and are making sure that it is maintained at this level. Mr. President, I would also like to note that the state provides state guarantees for some important projects. One of such projects is the project of the Southern Gas Corridor. It is gratifying, as we have reported to you, that there is no complete need for funding of this project. However, negotiations have been held with foreign financial structures. In other words, they were ready to allocate these funds, but as the first package we declined to borrow $2 billion – there was no need for that. Another pleasing circumstance is that our company, the Southern Gas Corridor, has concluded a loan agreement in the amount of $750 million with the Multilateral Investment Guarantee Agency - MIGA, and there is no need for this loan now. So both due to the savings on this project and in connection with the launch of the project, our company already has a free financial flow and covers arrears at the expense of these funds.
In general, Mr. President, I would like to note that all conditions have been created to ensure that state budget obligations are fully met by the end of the year. In particular, it is encouraging that the bodies responsible for state budget revenues are exceeding the forecast figures.
President Ilham Aliyev: This year, record figures have been achieved in agriculture. As I have already noted, this has been possible as a result of the reforms carried out. The steps taken in different directions have led to a revival of agriculture. Of course, state support, as always, is provided this year as well and will continue to be provided. The steps taken in this direction are already yielding tangible results and agriculture is successfully developing, especially in the field of crop production. Growth in livestock breeding is at about 3 percent. I believe that this industry should receive more attention so that growth in animal husbandry also becomes significant.
According to the data available to me, grain production has increased by 40 percent. The yields are also quite high. In comparison with previous years, today the yields exceed 30 quintals. But there such farms where yields are 60 quintals and higher. This suggests that the modern approach, the development of agriculture on a scientific basis have significantly increased and will continue to increase productivity.
Production of other types of produce has also increased. The production of melons and watermelons has increased by about 40 percent, fruits by more than 20 percent, cocoons by 25 percent, vegetables by 14 percent. That is, exports are increasing as well, and, of course, in the coming years, by pursuing our policy in this direction, we will achieve even better results.
Minister of Agriculture Inam Karimov now has the floor to speak about the work done in this area.
Minister Inam Karimov said:
- Dear Mr. President.
Measures continue to be taken within the framework of agricultural reforms you are implementing. The systematic measures adopted are yielding positive results. Growth is observed in all sectors, including crop and livestock production. One of the main tasks facing us this year is to be constantly alongside farmers, be directly involved in solving their problems. Our main concern and task was related to grain production, which constitutes our planting balance. This year, grain was sown on an area of 1 million 12 thousand hectares. Of these, 670 thousand hectares were sown with wheat and 342 thousand hectares with barley. As a result of the measures taken, the main issue was to provide proper equipment. Every year our farmers submitted numerous requests related to this area. However, as a result of the introduction of a positioning system, in particular the use of modern equipment, the installation on GPS on combine harvesters and their proper deployment, the harvest was completed 20 days earlier this year. This year's yields were also higher. In comparison with last year, about 2 quintals more yield was harvested from each hectare. Along with this, the main task facing us at the present time is associated with the development of cotton-growing. Cotton harvesting will start next month – in September. Work will be carried out to fully provide both machinery and fertilizer.
Mr. President, one of the main factors that pleases the farmers is that, as a result of the reform you have carried out in relation to leasing activities, full liberalization is already observed on the market. Government benefits and subsidies are already being applied to all supplier companies. The cost of equipment on the market has dropped by about 30 percent.
We believe that as a result of your reform related to subsidies, this liberalization will also be carried out in relation to fertilizer starting from next year. On the one hand, fertilizers will become accessible, while on the other, there will be a significant reduction in their prices. At present, we are faced with the task of improving the accessibility of fertilizers, because sometimes farmers have to travel long distances to obtain them. Therefore, starting from this year the Ministry of Agriculture has carried out field sales of fertilizers and their delivery directly to yards and farms.
Dear Mr. President, one of the main tasks you set is to promote e-agriculture. Currently, more than 300,000 farmers are already registered in e-agriculture. In January next year, the provision of subsidies will be fully implemented in electronic form. The e-agriculture system will, at the same time, allow us the opportunity to plan and predict the sowings of our farmers in advance. In particular, our farmers are required to declare their crop plans in e-agriculture. Along with this, another important reform you are pursuing is associated with the new system of subsidies. Currently, preparations are under way to apply the system of subsidies. From January 2020, subsidies will already be provided under the new system. This, in the first place, will allow us the opportunity to increase yields, employment and food security, as well as our export potential in the field of agriculture.
Summing up the meeting, President Ilham Aliyev said:
- Things in this area are also going well. Agriculture is an important sector for any country. Ensuring food security is our main task. At the same time, we are expanding our export opportunities. Farmers are provided with additional benefits. The provision of equipment is at a high level. This year, the sale of more than 700 units of equipment has already been secured. Due to the acquisition of large quantities of agricultural machinery in previous years, we were able to achieve development of this sector. Of course, the key role here is played by modern technologies and modern irrigation systems. Currently, a nitrogen fertilizer plant is operating in Azerbaijan. In other words, there is no need to purchase nitrogen fertilizer abroad. The production of pivot irrigation systems has also begun in Azerbaijan. We, of course, are taking serious steps towards self-sustainability in this area. I am sure that even better results will be achieved in this sector in the coming years.
According to the data available to me, non-cash payments are still at a low level. I believe that very serious steps need to be taken in this area. We must try to increase the volume of non-cash payments. The number of POS-terminals should also be increased. I am told their number is not increasing. This problem must be resolved because the low level of non-cash payments, of course, feeds the shadow economy. The fight against the shadow economy is one of the main issues for us now. The information provided here today indicates that important steps have been taken in this direction. Over one hundred thousand employment agreements have been signed, but earlier these people worked in the shadow economy. The low level of non-cash payments is, of course, unacceptable. I am instructing you to analyze this issue. We need to take serious steps. The total amount of non-cash payments in Azerbaijan is at $2.3 billion. Right?
Presidential Aide for Economic Policy and Industry Natig Amirov: Yes, except for cash withdrawals.
President Ilham Aliyev: This area should be given very serious attention.
Despite the low level of inflation, in some cases there are artificial price hikes. Relevant agencies need to address this issue seriously. As soon as I receive information, I immediately issue instructions. In other words, constant control over the consumer market is necessary, as cartel transactions can’t be ruled out either. Of course, we cannot allow artificial overpricing. A strict control mechanism is required. This area must always be in the spotlight.
Numerous projects are being implemented in Baku, including the renovation of public utilities. More than 400 elevators have been purchased and are now being installed. More than 50 model courtyards have been handed over to citizens. For urban transport, 300 new and modern buses are being imported, and this will really be a major advancement because the modernization of urban transport is very important for us – for people’s comfort and for safety. Subway cars are being purchased and underground construction is under way. I can say that Baku is one of the cities where underground is under construction. In post-Soviet space, we are among a few cities in this area. In general, a lot has been done to improve, modernize and enhance the beauty of the city of Baku. Baku is one of the most beautiful cities in the world today. But there are problems as well. Their solution should always be in the spotlight.
Street lighting is still not up to par. The city center, of course, is illuminated, but in some places there is no street lighting at all. This issue needs to be given very serious attention. Steps are currently being taken in the field of domestic waste management. Several years ago, a large domestic waste plant was built in Balakhani, a landfill was set up and waste segregation is carried out there. We need to create a chain. We need to create a single chain from home to the plant of domestic waste. Currently this project is being implemented in Baku with the participation of international consultants. The construction of the suburban railway line continues. This is also a very important project. New recreation areas are being established in Baku. Baku today is a city of parks and squares. Recreation areas are available to our people, and this is highly appreciated by the population.
Steps are being taken to revitalize the construction sector. Currently, the construction of hundreds of residential buildings is under way in Baku. This is a positive fact that has a good impact on the construction materials sector and creating conditions for the creation of jobs. I should also note that since the beginning of the year, 60,000 jobs have been opened. Some of them have been opened in the public sector. We are doing this for unemployment to stay low. Therefore, important steps have been taken to create paid public jobs, and about 40,000 of these have been created.
So this is what we have done in the social sphere. These jobs are being created for our people to be provided with work. But we all need to know that the private sector should make a greater contribution to job creation. As a result of interaction with representatives of the private sector, we are seeing growth in this area. Economic recovery, of course, also contributes to job creation. This should be a permanent process.
Our population is growing. In the years of independence, it has grown by about 3 million people. This year, we were happy to celebrate the birth of a 10 millionth citizen. This is our great asset, but, on the other hand, we should also say that we must always create jobs. We need to be engaged in the creation of social infrastructure, additional measures must be taken in the transport sector so that the growing population, our people feel safe and are employed. I want to say again that this is a permanent process because the successful development of Azerbaijan, the development in the field of industry and in the economic sphere are factors that have a direct impact on population growth. We must always be ready for this.
It is necessary to find new sources for economic growth so that it is sustainable. The main role here is played by the development of the non-oil sector. However, we also need to know that the main sector for our economic development today is the oil and gas sector. Very important steps have also been taken in this area, too. Significant work has been done in connection with the implementation of the Southern Gas Corridor. Currently, the implementation of the Southern Gas Corridor is coming to an end. The execution of its last segment is drawing to a close. This is a historic project. As a result of the launch of the Southern Gas Corridor, Azerbaijan will receive additional revenues. I consider that the work done in six months deserves approval.
Azerbaijan is moving forward along the path of sustainable development. The financial and economic crisis that gripped the world a few years ago also affected us. It is now already in the past. We have managed to overcome this crisis with our head up high. We were able to maintain and increase our foreign exchange reserves. As I have already noted, in six months alone we have accumulated $4 billion of additional foreign exchange reserves. Of course, this creates good conditions for our future. However, the reforms carried out in the tax and customs systems, the work carried out in the field of administration and the growth of revenues, of course, should be the main source of our budget. We have to use funds very sparingly. In particular, very strict control should be exercised over state investment projects. State-owned companies should have a corporate governance system. Instructions in this regard have been given. I believe that very soon we will see companies managed by modern corporate rules. So this is a very important matter. For further development in the economic sphere, we, of course, should involve foreign experts, and we are doing that. We extensively cooperate with international financial structures, this work will be continued in the future. So the new economic model is today's must. These questions are also reflected in the Strategic Roadmap designed until 2025.
Azerbaijan should develop along the path of innovation, modern governance and liberal economy. All necessary measures have been taken. It is no coincidence that this is acknowledged by international financial institutions. The work aimed at improving the business environment shows that Azerbaijan today is among countries successfully developing in the economic sphere on a global scale. In parallel, we are paying great attention to the social sphere. The projects implemented this year – the projects and initiatives worth billions of dollars – demonstrate our intentions and our policies. They show that the people of Azerbaijan are at the center of our policy. Our economic power should have and has a direct impact on the social sphere. We will continue to move along this path. I am sure that all our planned goals will be met by the end of the year.
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