Azerbaijani president allocates $600 million to combat coronavirus’ impact – economists unhappy

Azerbaijani President Ilham Aliyev has allocated 1 billion manat [about $600 million] to mitigate the negative effects of the coronavirus pandemic on the Azerbaijani economy. Local economists say this measure will be ineffective, as it would be better to exempt businesses from taxes and facilitate the payment of loans.

What will the $600 million be spent on?

On March 19, Ilham Aliyev ordered that the budget allocate about $600 million to ensure macroeconomic stability, address employment issues and minimize the negative impact of the pandemic on business.

How exactly these problems will be solved and the allocated funds will be distributed is not yet clear – the package of proposals should be ready in 15-25 days.

For local economists, this idea seems unpromising in advance.

Little money, a lot of time to think

The head of the independent Center for Economic Research, Gubad Ibadoglu says that too little money has been allocated, and, on the contrary, the government is taking too much time to reflect. 

In his opinion, this indicates that the government was unprepared for the emergency situation.

“Simply financial injections cannot solve the problem. Moreover, given the practice of managing budgetary resources, we can expect that a considerable part of 1 billion will not reach the destination,” the Caucasian Knot quoted the economist as saying.

Ibadoglu proposes to introduce tax and credit benefits for business; pay compensation to employers and workers in areas that are severely affected by the crisis; pay benefits to those who lose their jobs due to the crisis; increase targeted social assistance, minimum pension, minimum wage and disability allowance.

But what about the shadow sector?

Natiq Jafarli, head of the Republican Center for Economic Research, believes the president’s order does not cover the full range of issues. He notes that about one and a half million residents of Azerbaijan work in the shadow sector, without formal labor contracts. These are mainly employees of cafes, pubs, and shops, which now face the threat of being left without work and without compensation.

Jafarli also believes that it would be much more efficient for six months to exempt some types of small and medium-sized businesses from taxes, and also to freeze interest on loans and provide benefits for public services.

“The state should enter into negotiations with landlords so that they reduce the rent. And the difference can just be compensated for by the money allocated by the president, ” he adds.

“Impulsive step”

The chairman of the commission on economic issues of the opposition Popular Front Party of Azerbaijan (PFPA) Neymat Aliyev said that the president’s order is more like “an impulsive step taken to confuse the challenges posed by the coronavirus pandemic and the collapse in oil prices.”

“The budget was calculated based on $ 55 per barrel. But now the price of oil has fallen to $ 30 and it is unclear how much this will continue. On the other hand, the state budget is not a bottomless barrel, everything is described in it point by point. Allocating 1 billion means cutting other articles. In general, any changes in the state budget should be made by the parliament,” he says.