Economist Intelligence Unit) -- The assets of the State Oil Fund of the Republic of Azerbaijan (SOFAZ) stood at US$35.9bn at end-2013, an increase of 5.1% compared with last year.
Total SOFAZ revenue stood at Manat13.6bn (US$17.3bn) in 2013, a decrease of 0.5% compared with 2012. Revenue from the energy sector (as opposed to earnings on financial assets) stood at Manat13.2bn, up by 0.5% on 2012. The fund's operations were based on a global oil price of US$100/barrel in 2013, slightly lower than the average price of US$109/b recorded for Brent crude.
In keeping with a long-running trend, transfers to the state budget were the largest source of SOFAZ spending in 2013, accounting for over 90% of the total. Transfers to the budget stood at Manat11.35bn, up by 12.3% compared with 2012. Drawdowns from SOFAZ to the budget have risen substantially in recent years, and in 2013 accounted for 58.2% of total government revenue.
With revenue flat and budget transfers rising rapidly, the net rate of growth of the oil fund fell significantly in 2013. This trend has been evident since 2010 as oil production has peaked, while prices have been flat since 2011.
In 2014 the government intends to cut budgetary transfers from SOFAZ in order to conserve the sovereign wealth fund's assets and reduce reliance on the oil and gas sector. This year's budget targets revenue of Manat18.4bn, of which Manat9.34bn will be comprised of transfers from SOFAZ, a reduction of 17.7% compared with the amount transferred in 2013.
At a conference on tax reform in early February, Sevinj Hasanova, deputy minister for economic development, stated that the non-oil sector should be the main source of budgetary revenue by 2020, implying further tapering of SOFAZ budget transfers over the next six years. With oil output projected to fall from 2016, however, conserving SOFAZ assets will depend on steady oil prices and successful diversification of the economy.
According to Ms Hasanova, tax revenue from the non-oil sector will have to rise by 10-15% a year to meet the government's fiscal target.
ANN.Az
