AZE.US
Rising global oil prices do not automatically make Azerbaijan wealthier, according to economist and REAL party chairman Natig Jafarli.
Writing on Facebook, Jafarli said that over the past two weeks he has frequently been asked whether higher oil prices could allow the government to increase social spending.
He acknowledged that when oil becomes more expensive, Azerbaijan’s foreign currency earnings and overall trade balance improve. Higher oil prices typically bring additional revenues to the country, which relies heavily on energy exports.
However, Jafarli noted that rising oil prices also push up the global cost of goods and services. Transportation, logistics and insurance costs tend to increase as energy prices rise, which ultimately affects import prices.
This is particularly important for Azerbaijan, which remains heavily dependent on imported goods.
According to Jafarli, the country imports around 75 percent of its food, about 87-88 percent of clothing, nearly 100 percent of mobile phones and computers, roughly 99.5 percent of cars, and around 99 percent of automotive spare parts.
In such circumstances, the gains from higher oil revenues can be offset by the rising cost of imports.
Jafarli argued that higher oil income does not necessarily mean the government should automatically increase social spending.
Instead, he suggested that reducing taxes, customs duties and fines could be a more effective way to stimulate economic activity and support business development in the country.