Why is the Chamber of Accounts worried about budget changes? |

The opinion says that it is natural gas prices In the first quarter of this year, the index increased by 2.8 times compared to the same period last year. Rising and high energy prices inflation In all areas of budget revenues (except for transfers from the oil fund) exceeded the forecast. Even in some areas where the revenue forecast has been increased in the updated budget, most of the new forecasts have already been met. According to the Chamber, high price increases and increased budget expenditures will also expand the tax base in the country. The state as a result of these factors tax There will be no risks associated with the amount of service to be directed to the budget.

In addition to raising the estimated price of a barrel of oil from $ 50 to $ 85, while the Chamber is preparing a new budget, inflation also drew attention to the increase in the forecast. Government in updated indicators inflation It also raised its forecast from 4% to 12.5%, ie more than tripled. The Chamber believes that higher-than-expected inflation will increase nominal GDP. The Chamber of Accounts said its inflation forecast would be close to the government’s figures. According to the agency, Although price increases will be relatively slow in the summer months, they will be higher by the end of the year. The chamber said more for the implementation of the projected increase in spending funds will be spent in the second half of the year. On the other hand, budget expenditures in Azerbaijan, as a rule, differ significantly in the 4th quarter execution is done. This suggests that the projected increase will create inflationary pressure not only this year, but also next year.

New budget risks

The Chamber of Accounts also announced the risk factors for changes in the budget. The agency stressed that the government’s draft budget changes do not include issues related to fiscal risks. At the same time, only the risks arising from the COVID-19 pandemic, declining oil prices and production volumes, public debt and large subsidies were considered the main risks. However, the Chamber believes that the new budget also has fiscal risks.

The agency believes that the amendments to the budget will increase current government spending. The fact that many of these costs are related to protected spending areas creates additional risks. These risks stem from the fact that this increase will place an additional burden on the budgets of subsequent years. In this regard, the Chamber said that energy prices will fall in the coming years and Of Azerbaijan In the event of a decrease in resource revenues, there will be serious risks associated with the implementation of budget commitments.

The Ministry of Finance also stated in its review and statement on the initial indicators of the state budget that in Azerbaijan social the increase in costs is met by unsustainable resources. After all, 90 percent of the country’s export revenues are still oil.gas formed at the expense of the sector. This point can become a serious test for macroeconomic and financial stability in the long run.

State-owned enterprises depend on the budget

Another risk factor facing the Chamber of Accounts is the serious dependence of public legal entities and state-owned enterprises on the budget. At the same time, the agency considers the delay in the transition to the new budget model (medium-term expenditure framework) as the main fiscal risk factors. The model has three main objectives: to strengthen fiscal discipline (1), to prioritize expenditure directions across sectors within a multi-resource package based on a sustainable fiscal framework (2), and to produce results-based budgeting based on performance indicators (3).

The Chamber also considers the existence of provisions in the legislation that allow the use of free balance among the risk factors. After all, according to the agency, the existence of such cases has a negative impact on the allocation of budget funds and creates the risk of lack of resources for the budget in the future. On the other hand, 60 percent of the increase in state budget expenditures in the updated budget will be spent by public legal entities and state-owned enterprises on capital expenditures. This increases off-treasury operations, creates resource scarcity risks, and limits the ability to track expenditure commitments.

Another shortcoming of the updated draft budget is that the documents reflecting the financing and target indicators of the increased expenditures on programs and sub-programs have not been disclosed. This is at the end of the year execution complicates the calculation of quality indicators for costs incurred. (Radio Liberty)