Azerbaijan's IMF Programme: A Three-Year Poverty Reduction and Growth Facility

Strategic Insights -

Azerbaijan's economic development has been underway since 2001, with the country's current International Monetary Fund (IMF) programme being a key driver of this growth. The three-year poverty reduction and growth facility loan of US$100m, agreed in July 2001, has aimed to reduce poverty and support structural reforms in the country. Despite initial progress, the disbursement of a third US$16m tranche has been delayed due to disagreements over a timetable for unifying crude oil and electricity prices.

Key Takeaways:

  • The IMF programme is focused on poverty reduction and civil society development, rather than macroeconomic stabilisation or balance-of-payments support.
  • The loan is tied to an annual review of the poverty reduction strategy paper by the World Bank and aims to support structural reforms, including fiscal framework enhancement, institution-building, customs regime reform, and energy sector reform.
  • The government agreed to include all subsidies given by the State Oil Company of the Azerbaijan Republic (SOCAR) in the budget, increasing transparency in the domestic oil sector.
  • Energy consumption ceilings were imposed on budgetary organisations, and utilities were instructed to disconnect service after ceilings were reached.
  • State-owned enterprises that do not pay their bills were to be cut off from January 2002 onwards.
  • Azerigaz and Azerenerzhi collection rates are to be monitored and published by category of end-users.
  • The government eliminated preferential consumer tariffs for gas and heating and transportation in January 2002.
  • The IMF proposed unifying crude oil prices in July 2002 and January 2003, with the current price being US$55/tonne.
  • The IMF estimated that the implicit energy subsidy caused by non-payment and subsidised prices was equivalent to 27% of GDP in 2000.

Statistics:

  • US$100m loand from the IMF, agreed in July 2001
  • First two tranches of US$10m each were disbursed in July 2001 and February 2002
  • Third tranche of US$16m was due in May 2002, but delayed
  • Proposed unification of crude oil prices: US$65/tonne in July 2002 and US$80/tonne in January 2003
  • Current domestic crude oil price: US$55/tonne
  • Estimated implicit energy subsidy: 27% of GDP in 2000
  • Number of state-owned enterprises cut off from energy supply: Not specified
  • Collection rates for Azerigaz and Azerenerzhi: Not specified

Sources:

  • Country Report (source not specified)