Azerbaijan cutting education, science spending due to financial pressure of pandemic

Azerbaijan plans to reduce spending on science and education during the upcoming adaptation of the state budget this week.

On August 4-5, the Milli Majlis interrupted the holidays and gathered for an emergency session to adopt amendments to the state budget for 2020 due to the worsening economic situation due to the coronavirus epidemic and falling oil prices.

The draft changes and amendments contain many interesting points.

• The price for a barrel of oil, off of which the budget will be built, has been reduced by $20. At the end of 2019, the budget was adopted based on a price of $55 per barrel. In the revised version, oil will cost only $35.

• Costs for science and education are being cut.

Science will be allocated 6.3 million manat [about $3.6 million] less than was envisaged in early 2020.

Education will have to make due with 81 million manat [about $47 million] less.

• Azerbaijan’s economy before and after the pandemic – what to expect and what to be afraid of? 

• Oil and coronavirus – the troubles of the Azerbaijani economy

Based on the current economic situation, the total expenditures and revenues of the state budget are changing.

The expenditure side will increase by 3.37 billion manat [about $2 billion].

However, the budget deficit in Azerbaijan will grow by about half a billion manat [about $300 million].

Another important point in the draft amendments and changes to the 2020 state budget is related to the abolition of the budget rule by January 1, 2022.

A budget rule is a special financial mechanism for limiting and regulating budgetary policy. Many international experts call the budget rule an effective tool for reducing the dependence of the budget on energy prices for resource countries.

Therefore, the decision to cancel it is causing great controversy amongst the Azerbaijani public. Some even say that the country will live without an approved budget for the next two years.

Commentary

Economic expert Togrul Mashalli in an interview with JAMnews:

“Of course, the country will not be left without a budget. The budget rule takes into account, among other things, the percentage of the budget that should be replenished from the oil fund. In other words, this is a budgeting plan that has been in effect since 2017.

Now the budgetary rule will be temporarily abolished due to the crisis, as budgeting outside the budgetary rule could be considered a violation of basic financial documents.”