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Azerbaijan The Budget
To lessen the budgetary impact of losing subsidies from the
Soviet Union, beginning in 1992 a value-added tax (
VAT--see
Glossary) and excise taxes were introduced to replace sales and
turnover taxes. The new taxes enabled Azerbaijan to maintain only
a small state budgetary deficit for 1992 (see
table 15,
Appendix). The deficit came mainly from increases in wages and
from defense and refugee expenses related to the conflict in
Nagorno-Karabakh. State-owned enterprises continued to survive on
liberal bank credits and interenterprise borrowing, which caused
the accumulation of sizable debts. Substantial increases in
defense expenditures (from 1.3 percent of GDP in 1991 to 7.6
percent in 1992) drastically reduced expenditures for consumer
subsidies in bread and fuels, as well as government investment
and other support for enterprises. Increased salaries for civil
servants also increased the 1992 deficit.
In mid-1992 Azerbaijan was not receiving enough printed
rubles from Moscow to meet wage payments, so it introduced its
own currency, the manat (for value of the
manat--see
Glossary),
at that time. Because domestic financial transactions still
involved Russian banks and many rubles remained in circulation,
the ruble remained in circulation as an alternate currency. After
ruble notes became more plentiful in late 1992, the manat
remained a small fraction of circulating currency. In September
1993, Azerbaijan planned to make the manat the sole national
currency, but the weakness of the Azerbaijani monetary and
financial systems forced postponement of that move. The manat
finally became the sole currency in January 1994.
Data as of March 1994
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