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Azerbaijan Economic Reform
Azerbaijan's prospects for movement toward a market economy
are enhanced by a fairly well-developed infrastructure, an
educated labor force, diversity in both agricultural and
industrial production, and yet-untapped oil reserves. Obstacles
to reform include the rigidity of remaining Soviet economic
structures, the Nagorno-Karabakh conflict, continued trade
dependence on the other former Soviet republics, insufficient
economic expertise to guide the transition, and capital stock
that is inefficient and environmentally hazardous.
Price Liberalization
In January 1992, about 70 to 80 percent of producer and
consumer prices were decontrolled, although prices for
commodities such as gasoline were artificially increased. Further
rounds of price liberalization took place in April, September,
and December 1992. Because most industries are still monopolies,
price-setting is supervised by the Antimonopoly Committee, which
approves requests for price increases and reportedly grants most
such requests. Because the state still procures much of
Azerbaijan's agricultural production, prices are set by
negotiations between the state and producers.
Retail price inflation surged after the first round of price
liberalization in January 1992. Thereafter, the monthly rate
eased somewhat, averaging about 24 percent during most of 1992.
According to official figures, in 1993 average living expenses
exceeded income by about 50 percent. The ratio of expenses to
income was about the same in Kazakhstan and worse in Armenia and
Turkmenistan. Although prices for items such as bread and fuel
remained controlled during 1993, in November 1993 the government
announced price rises because commodities were being smuggled out
of Azerbaijan to be sold elsewhere where prices were higher. By
the end of 1993, it was reported that the minimum weekly wage
would not even buy one loaf of bread and that hundreds of
thousands of refugees in Azerbaijan "simply face starvation," a
situation that heightened social and political instability.
Data as of March 1994
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