Baku, a frequent borrower, says it didn’t like the terms.
Rising energy prices should help Azerbaijan balance its budget next year. (Energy Ministry)
Azerbaijan has turned down an offer of $95 million from the World Bank to support Baku’s fight with coronavirus.
Finance Ministry Spokesman Mais Aghayev told the APA news agency on June 23 that initially Baku had shown an interest in the loan and begun negotiations, but had soured on the terms. “The directions, conditions, and procedures of the issuance of the loan did not satisfy our side and the negotiations stopped accordingly,” Aghayev said without elaborating.
Offered under the Bank’s COVID-19 Fast-Track Facility, the money was earmarked for the state health insurance agency and the Ministry of Labor and Social Protection, which has faced criticism recently for failing to support disabled veterans.
The COVID-19 Fast-Track Facility, which is worth up to $160 billion, supports projects which “strengthen countries’ pandemic response.”
Natig Jafarli, an economist and representative of the opposition REAL party, wrote on Facebook that the government declined the loan because “the most important condition is transparency.”
“To take responsibility for spending $95 million, submit reports, and spend transparently? Of course, it is not favorable to the government,” he said.
Another economist, Rashad Hasanov, suggested in an interview with local news website qaynarinfo.az that Baku’s refusal may be because the government believes the pandemic is “over.”
“In such loans, spending priorities are established in advance,” he added. “There is no possibility for Azerbaijan to change how the funds are used.”
Hasanov also hinted at debt ceilings. Under a 2018 law, government debt cannot surpass 30 percent of GDP (20 percent after 2025).
“Besides, serious borrowing is expected [to be needed] in the reconstruction of Karabakh,” Hasanov said, referring to the territories Azerbaijan took back from Armenian control last fall. “Thus, the state aims to reduce loans in areas of less importance.”
Azerbaijan faced an immediate economic slump during the initial stages of the pandemic last year when the price of oil and gas, its chief export, plummeted. Early on, to fight the virus, the government even sought donations from private citizens, companies, and government agencies.
The IMF says GDP fell 4.3 percent in 2020. The growth outlook for 2021 is somewhat better at 2.3 percent, though the IMF said this month it expects the budget deficit “to remain high at 5.6 percent of GDP, owing to continued COVID-19 spending and increased reconstruction spending, before starting to narrow in 2022.”
According to a tally by APA, the World Bank has financed over 70 projects worth a cumulative $4.4 billion in Azerbaijan since the country joined in 1992. Today there are 10 ongoing projects worth $803 million. Most recently, on May 20 the Bank approved a loan of $65 million to fund “climate resilient transport connectivity and improve market accessibility along the Salyan-Bilasuvar road in the south of the country,” which stands to benefit a quarter of a million people living along the route.
Heydar Isayev is a journalist based in Baku.