On May 27th parliament approved amendments to the 2011 budget. The government now targets budget revenue of Mant15.55bn (US$19.68bn; up from its earlier target of Manat12.06bn) and expenditure of Mant15.94bn (revised up from Manat12.75bn). The authorities expect the budget deficit to narrow from Manat363.5m (US$454m) in 2010 to Manat387m in 2011 (equivalent to 0.9% of GDP, based on the government's GDP forecast).

In April officials signalled that the budget target for 2011 could be revised, as oil prices are much higher than they originally forecast (May 2011, Economic policy). Following the approval of the amendment to the budget by parliament, the finance minister, Samir Sharifov, said that the conditions in the global oil markets had created favourable conditions for Azerbaijan. To highlight this, Mr Sharifov said that higher oil prices had led to an increase of Manat193.5m in revenue to the budget and an increase of Manat976.4m in revenue to the State Oil Fund of the Republic of Azerbaijan (SOFAZ, the overseas windfall fund). In line with their previous pronouncements, the authorities raised the official oil price forecast for 2011 to US$80/barrel, from a conservative forecast of US$60/b.

Nonetheless, although higher oil prices will boost revenue, the main reason behind the increase in the authorities' revenue target is the planned rise in transfers from SOFAZ to the budget. In the initial 2011 budget, transfers from SOFAZ were set at Manat6.48bn, over one-half of budget revenue. The government now plans to transfer Manat9.2bn to the state budget, equivalent to almost 60% of the revenue target. The increase in SOFAZ transfers and in subsequent budget expenditure has primarily been driven by the government's plans to raise social spending, including a rise in public-sector wages and benefits payments. The government's decision to increase spending in such areas has probably been driven by concerns over the increase in social unrest, albeit on a small scale, since the start of 2011.

Download the numbers in Excel