Is Azerbaijani Oil Fund’s 2015 budget realistic?

Is Azerbaijani Oil Fund’s 2015 budget realistic?

The budget of the State Oil Fund of the Republic of Azerbaijan (SOFAZ) for 2015 has been approved. SOFAZ’s income is expected to be 10, 246 billion manat ( $13,136 billion US) meanwhile the expenditure will be 11, 814 billion ($ 15,146 billion US) in 2015 according to the official law. Noting that the oil price set in the 2015-state budget of Azerbaijan stands at $ 90 per barrel, SOFAZ said the oil price in the state budget is set on the basis of macroeconomic forecasts of the Ministry of Economy and Industry. In turn, the state oil fund’s budget is formed using an indicator of oil prices in the state budget. Meanwhile, SOFAZ is optimistic over oil prices although there has not been any good signals, yet related to potential increasing of crude oil prices.

9.741 billion manat from 10, 246 billion manat in the revenue part is sales of the Republic of Azerbaijan’s share of hydrocarbons. This means more than 95.0 % of SOFAZ’s revenue is generated from the share of Azerbaijani part in the profit oil. This also means that more than 95.0 % of SOFAZ’s income directly depends on crude oil price in the world market. Motionless, revenues from SOFAZ’s asset management is only 494, 357 million manat. So, revenues from SOFAZ’s asset management is less than 5.0 % of total budget revenue in 2015. Meanwhile, revenues from SOFAZ’s asset management is 1.5 % of the fund’s total assets. This confirms that SOFAZ’s income from the asset management is unmoving marginal. Then, again, SOFAZ’s annual income will be ordered by the crude oil price in the world market.

Formerly, if average price is $ 60 US in 2015 what will be happened with SOFAZ? CESD’s latest assessment show that SOFAZ will earn $ 4.5 billion US less in this case. Then, the oil fund’s total income will $ 8.636 billion US instead of $13,136 billion US in 2015. In this case, SOFAZ’s deficit will be $ 6.510 billion US instead of $ 2.0 billion US this year. So, how SOFAZ will meet its comments with such huge deficit?..

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