Economic Outlook and Budget Process by Fuad Ganjaliyev, Head of the Budget Department, Ministry of Finance, Azerbaijan

2. Republic of Azerbaijan

3. General information
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Country name – Azərbaycan Respublikası – the Republic of Azerbaijan
Area – 86.6 thsd. sq. km
Population – 9442.5 thsd people (end of September, 2013)
Capital – Baku
State language – Azerbaijan
Religion – separated from state, all religions are equal
Currency unit – manat, AZN (1 USD=0.78 AZN, 1 euro=1.05 AZN)
Location – south-eastern part of Southern Caucasus
Neighbour countries – Armenia (1007 km), Georgia (480 km), İran (756 km),
Russia (390km), Turkey (13 km)

4. Branches of power
• Legislative power – Milli Majlis (Parliament), 125
Deputies, elected by direct elections for 5 year terms
• Executive power
– Head of State – President, elected by direct elections for a 5 year
term. Executive powers belong to the President.
– Head of Government – Prime-Minister, appointed by the President,
by consent of the Milli Majlis. The President establishes the
Cabinet of Ministers. The Cabinet of Ministers is subordinate to
the President and reports to him.
• Judicial power – Constitutional Court, Supreme Court,
Courts of Appeal and other specialized courts

5. Socio-economic indicators
2010 e
GDP
real growth
2011 e
2012 e
2013 f
2014 f
bln. USD
52.9
66.0
68.7
69.7
74.7
per cent
5.0
0.1
2.2
4.5
5.2
5922.0
7155.6
7490.5
7706.2
7793.1
GDP per capita
USD
CPI
per cent
5.7
7.9
1.1
3.3
5.5
- revenue
per cent
26.9
30.2
32.0
35.0
31.4
- expenditure
per cent
27.7
29.6
32.3
36.3
34.3
Share of state budget in
GDP

6. Socio-economic indicators,
end of September 2013
2013,
9 months
GDP
real growth
bln. USD
54.8
per cent
5.4
GDP per capita
USD
5871.4
CPI
per cent
2.9
bln. USD
18.4
per cent
33.5
bln. USD
16.3
share in GDP
per cent
29.8
International reserves
bln. USD
49.4
State budget
- revenue
share in GDP
- expenditure

7. The budget process

8. Legislative acts on the budget
process
• Constitution of the Republic of Azerbaijan
• “Law on Budget System”, July 2, 2002 (made several
amendments for improving budget and increasing transparency)
• Rules on preparation and execution of state budget, CoM
Degree, № 75, May 24, 2004
• CoM degree on drafting state and consolidated budget
(annual)
• Budget classification, CoM Degree, № 149, October 6,
2004
• Tax Code and etc.

9. Structure of budget
Consolidated
budget
State budget
Centralized
revenue and
expenditure
Budget of Nakhchivan
Autonomous Republic
Local revenue
and expenditure
Budget of State
extrabudgetary
funds
State Social
Protection Fund
Projects financed
by foreign credits
State Oil Fund

10. Budget process
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3rd week of January
– Cabinet of Ministers issues a decree on starting the draft budget process
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End of February
– Ministry of Economy and Industry corrects medium-term socio-economic
development program
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March
– Initial medium-term budget and investment program is prepared
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till April 15th
– The initial drafts of the State Budget and investment program along with the main
directions of fiscal policy, indication of the highest levels of revenues and
expenditures according to sector level of budget classification, the state debts,
priority expenditures, consolidated budget forecast for the next year and subsequent
three years, are submitted to the Cabinet of Minister for their consideration
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Till May 1st
– Ministry of Finance prepares and sends out an instruction letter on budget
preparation to line ministries
– The instruction letter includes:
• Expenditure limits on organizations and every sectors, approved norms on
current expenditures, forms, supporting documents, etc

11. Budget process (cont.)
• Till July 1st
– Budget project should be submitted to the Ministry of Finance by
organizations, involved in revenue collections and financed from the State
Budget
• July - August
– Discussion of the budget project with line ministries. Based on discussion
a protocol is signed
• Till September 15th
– MoF submits a draft State Budget to Cabinet of Ministers for the
following year and indicators for a consolidated budget for the subsequent
3 years
• Till September 25th
– Cabinet of Ministers submits a draft State Budget to the President for the
following year and indicators for a consolidated budget for the subsequent
3 years
• Not later October 15th
– President submits draft State Budget to Parliament for the following year
and indicators for consolidated budget for the subsequent 3 years
(Constitution of AR, article 109.2)
• Till December 20th
– Milli Majlis (Parliament) appoves draft State Budget for the following
year

12. Documents to be prepared and submitted together with
the draft State Budget
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Draft law on the State Budget for following year and explanation on that
Socio-economic development concept and forecast indicators of Azerbaijan
Republic for the following and subsequent 3 years
Main directions of fiscal policy
Targeted programs to be financed by resources of State Budget
Draft budget on revenue classification, and expenditure with breakdown by
functional, economic and organizational items
Information on the state debts, state guaranteed and other liabilities
Draft consolidated budget for the following year and subsequent 3 years
Consolidated financial balance sheet for the whole territory of Azerbaijan
Republic
Draft laws on budgets of extra-budgetary state funds for the next budget year
Compare of the next budget year revenues and expenditures with the actual
results of the previous year and expected results of the current year (according
to the revenues classification, at the paragraph level of functional, economic
and organizational classification of the expenditures) and etc.
other documents that the President considers expedient

13. Transparency in budget process
• Publication of CoM degrees on drafting state and
consolidated budget
• Open session of MM
• Discussion and debate on mass media, TV
• Publication of reports on budget execution
• Publication draft budget law
• Publication of annual budget and its execution
• Presentation of draft state and consolidated budget
• Citizen budget

14. Reforms starting from 2011
• Improvement of budget classification
• Presentation of draft state and consolidated budgets were
prepared and published on the official web page of the
Ministry of Finance of the Republic of Azerbaijan before
submitting them to the Parliament
• Submission to the Parliament midterm of state and
consolidated budget (by revenue classification and
functional classification of expenditure)
• Detailed breakdown of state investment expenditures were
submitted to the Parliament of the Republic of Azerbaijan.
• Increased the share of program budget expenditure
• Adding data on consolidated budget to execution report of
state budget

15. Chamber of Accounts
• Independent state supreme audit body
• Organizational structure (Authority to audit all
organizations, including extrabudgetary funds and secret
(defence and national security) bodies)
• Memorandum between CoA and MoF
• Resolution of MM on budget of CoA
• Opinion on draft budget and budget execution

16. Milli Majlis (the Parliament)
• High level of legislation body, independent from
executive power
• Resolution of MM on budget of MM
• Discussion of draft budget and budget execution
• Authority to make amendments to draft budget
– Draft budget - 16 984,4 mln AZN (2012), 19810,0 mln. AZN (2013)
– Adopted budget – 17 072,0 mln AZN (2012), 19850,0 mln. AZN (2013)
– Revised budget – 17 672,0 mln. AZN (2012)