IMF welcomes Azerbaijani government's plans to improve targeting of social assistance

The International Monetary Fund considers it appropriate to use the existing fiscal space to mitigate the impact of higher food prices and welcomes plans to improve the targeting of social assistance, Report informs, citing IMF's Staff Concluding Statement of the 2022 Article IV Mission held in Baku on May 25-June 7.

"Given the robust performance of nonoil revenues and spending discipline, the authorities have fiscal space to mitigate the impact of the war in Ukraine and high food prices on the population. The authorities implemented a package of budgetary measures to protect the vulnerable from high food prices, including adjustment to pensions and measures to ensure food security," the statement reads.

These measures include a 20% increase in the minimum wage and minimum pension, as well as a 35% increase in social benefits. In addition, subsidies to flour producers have been extended and will remain in effect until further notice, while the VAT exemption for wheat, wheat flour and bread has been extended until January 1, 2024. The total social package for 2021-22 is 2.1 billion manats (1.6% of GDP) and covers 3.5 million people.

The fund notes that increased social spending is supported by projected strong nonoil revenue growth and does not pose a risk to fiscal sustainability.

"Looking ahead, staff notes the authorities’ plans to further improve the targeting of social assistance, by improving the digitalization of the information of socially vulnerable families," the statement reads.

The IMF analysts note that currently, there is an information gap in the registry that does not permit to fully assess the financial situation of households: "Pilot project is planned to start in several regions this year to close this gap."