Our Analytics 10 september — 13:07

President Aliyev dissolved Council and created new one: For new decade (Our afterword)

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BY ELNUR MAMMADOV, ECONOMY SECTION

President of Azerbaijan Ilham Aliyev has signed yesterday a Decree on the creation of a new framework for the management of economic policy and economic reforms in the Republic of Azerbaijan and the abolition of the Decree of the President of the Republic of Azerbaijan No.3 dated July 15, 2016 'On the establishment of the Financial Stability Council of the Republic of Azerbaijan.'

By one decree, the head of state liquidated one council and created another. At first glance, one might think that there was a simple change in the names of the structures.

Is it really so? To answer this question, let us see when and for what purpose the Financial Stability Council was created in its time and what purpose is now being set for the Economic Council.

The Financial Stability Council of Azerbaijan was established in July 2016. The country had just experienced two terrible devaluations of the national currency, and the manat exchange rate was still experiencing high volatility, for which there were external and internal reasons. The global economic crisis and the many-fold slump in oil prices were combined with the currency rush caused by dishonest bankers inside the country. The created Chamber for Supervision of Financial Markets also failed to cope with the task. This could not go on for long, and the head of state created the Financial Stability Council with broad powers. Its purpose was to ensure the further strengthening of macroeconomic stability and financial stability of the country, conduct a coordinated policy in this area, achieve effective regulation and law enforcement practice.

Already next year, macroeconomic indicators began to improve, the manat exchange rate stabilised, so much so that legends began to circulate about the exchange rate policy of the Central Bank. Its managed floating rate has kept the dollar-manat ratio at 1.7 for several years.

Subsequently, the Chamber was liquidated, it lost its relevance and only began to interfere with the further development of the country's financial market. The financial market has stabilised, and the Financial Stability Council has fulfilled its main task. And after the transfer of all powers in the financial market to the Central Bank, it could also turn into another superfluous bureaucratic link.

The emergence of the Economic Council was facilitated by a new aggravated situation. The new global crisis caused by the coronavirus pandemic has become a powerful test of the strength of the economies of various countries. The world has joined forces in the fight against the coronavirus itself, but each country will have to solve the economic problems caused by it by itself. Azerbaijan, in principle, is successfully fighting the consequences of the pandemic. But the results are too great, and when it ends its destructive activity is unknown. There are many other problems as well. So the need is ripe for a new operational structure, endowed with great powers and with a long-range scope.

Yes, the decline in recent years in the rate of economic growth in the world economy, a significant increase in the price situation on commodity markets, an increase in the fragility of global financial stability, in particular, the coronavirus pandemic and the resulting limitation of socio-economic activity in most countries have posed new challenges to the economy of Azerbaijan. To sustainably maintain and further increase the achieved level of socio-economic well-being in an unfavourable global environment, it is necessary to strengthen the international competitiveness of the national economy, minimise its dependence on oil revenues, and maintain macroeconomic and financial stability. That is, financial stability retains its relevance again, but other factors are already in the forefront. And these are not the only tasks facing the new council.

Over the past 20 years, the country's GDP has tripled. And in the next decade, President Ilham Aliyev sees one of the most important upcoming strategic challenges in ensuring a twofold growth of the economy to increase the socio-economic well-being of the country's population. And for this it is necessary to ensure the formation and development of new mechanisms, the identification of national development priorities based on the creation of more sustainable and inclusive sources of economic growth, in particular, attracting private investment, including foreign direct investment. We need to expand non-oil exports, actively connect to the global value chain, radically improve the investment environment, further improve the quality of human capital, adapt to business requirements, more effectively protect property rights, and fulfil other business-friendly strategic objectives.

And for an adequate response to strategic challenges, ensuring a successful transition to a new model of economic development, forming a framework for economic policy and economic reforms, it is necessary to create a new framework for strategic management of economic policy. And this framework should ensure the formation of a strategy, the purpose of which is to accelerate the socio-economic development of the country and modernise the national economy in the post-pandemic period, in particular, the preparation and successful implementation of the program of economic reforms.

In short, we can say that the Economic Council is to submit proposals to the head of state on defining the directions of reforms and economic policy in the next 10 years to maintain macroeconomic stability and socio-economic development in Azerbaijan. This, one thinks, is enough to understand what the difference is between the Financial Stability Council and the Economic Council. And if the Financial Stability Council managed to rectify the situation on the financial market in a short time, we can express confidence that the Economic Council will also be able to cope with the task set before it and achieve double economic growth in the country in a decade.

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