Azerbaijan can pay off external debt in one day, expert says

By: Aynur Karimova

Azerbaijan is able to pay off its external debt in one day, economist Ogtay Hagverdiyev believes.

Azerbaijan’s public debt is less than $10 billion, he told local media. “Every year Azerbaijan repays its debt and this year it will repay about $250 million.”

Public debt is the internal and external debts of the country.

The Azerbaijani Finance Ministry reported that the volume of the external public debt of Azerbaijan made up 5.082 billion manats as of January 1, 2015, which is 8.6 percent of GDP. Around 7.3 percent of external debt was calculated for up to 10 years, 60.2 percent from 10 to 20 years, and 32.5 percent for more than 20 years.

As of January 1, the currency structure of loans is as follows: 9.9 percent of the funds were drawn in the SDR (IMF Special Drawing Rights), 64.8 percent in U.S. dollars, 21.4 percent in euros, 2.1 percent in Japanese yen, 0.7 percent in Islamic dinars (a currency that aims to revive the historical gold dinar which was a leading coin of early Islam. Currently, the members of the Islamic dinar system are Malaysia, Saudi Arabia, United Arab Emirates, Kuwait, Qatar, Bahrain and Oman), 0.4 percent in Saudi Riyals, 0.5 percent in UAE dirhams, 0.2 percent in Kuwaiti dinars.

The funds – mainly drawn from the World Bank, the Japan International Cooperation Agency, the Asian Development Bank, Islamic Development Bank, the European Bank for Reconstruction and Development, and other international financial institutions – were directed at supporting economic reform programs and the renovation of infrastructure, including the construction of roads, improvement of water supply systems in the districts, the development of railway services, as well as industry and other areas.

Hagverdiyev said that in some European countries, public debt is enormous.

“But the paradox is that the living standard of population in these countries is high while the government is on the verge of social bankruptcy. These countries’ governments increase the wages and pension year on year and improve the living standards, but in this case, their economies suffer,” he noted.

Hagverdiyev also added that when the government delays the payment of wages of employees of the budgetary organizations, the state becomes a debtor.

“For example, Japan with the largest public debt occupies the first place in the ranking of countries. Some 90 percent of its debt falls on internal debt. In Azerbaijan, on the contrary, the external debt is more than internal,” he added.

The expert also said that all debts arise from budget deficits.

“For example, Greece is currently in such a situation because for many years it completed the year with a deficit. The country issued securities which were redeemed by the European Central Bank. Some $172 billion out of Greece’s $312 billion public debt is its debt to the European Central Bank, and $50 billion to the International Monetary Fund. It issued securities in order to bridge the budget deficit, but the result is still deplorable,” he noted.

According to the European Union rules, the member states of this organization should not allow the budget deficit to exceed 3 percent of GDP.

Azerbaijan’s economy, which recorded a threefold increase, has achieved a rapid development over the past ten years. The Central Bank of Azerbaijan said earlier that the country’s strategic currency reserves which amounted to $51.4 billion in 2014, are enough to cover a three-year import of goods and services, as well as exceeds the external public debt eightfold.