The World Bank approved the First Poverty Reduction Support Credit (PRSC I) in the amount of US$20 million for the Republic of Azerbaijan. The objective of this adjustment operation is to support the Government’s efforts to carry out reforms as defined in the country’s State Program on Poverty Reduction and Economic Development (SPPRED).
Since the 1990s, Azerbaijan has been carrying out a large-scale reform program to establish a market-based economy, ensure macroeconomic stability, and improve public management. These efforts have widely been supported by the World Bank and the IMF. The Second Structural Adjustment Credit (SAC II), approved in 2002, has helped the Government pass a new Budget Systems Law; enact a new procurement law and adopt its implementation mechanisms; establish the Chamber of Accounts as the supreme auditing institution; adopt a governance and management framework for the Oil Fund; and reduce implicit subsidies in the electricity, gas, and water sectors.
The PRSC will deepen the reform agenda supported by SAC-II through supporting the implementation of measures to further improve public governance and more effective use of public resources; improving the overall business environment for private sector development and investment; and strengthening financial discipline and service delivery in the utility and social sectors.
The PRSC is structured around the four Strategic Goals of the Country Assistance Strategy to Azerbaijan, reflecting the Government’s reform priorities:
- Managing the oil boom to maintain macroeconomic stability, avoid „Dutch disease“ and facilitate non-oil growth, employment and pro-poor expenditures
- Generating jobs and sustainable non-oil growth by improving the business environment and access to financial services, building SME support infrastructure, and stimulating agriculture
- Improving access to services and infrastructure by reversing the decline in social services and assistance and in infrastructure
- Realizing oil and gas potential to the extent and in the time frame that SPPRED presumes
- Implementing the SPPRED: monitoring outcomes and institutional capacity building ensuring the sustainability of the reforms remains in the forefront.
It is expected that the reforms supported by PRSC would lead to the improvement of the business environment and investment climate, which will in turn directly contribute to stimulating growth and creating jobs, particularly in the non-oil sector. It will also lead to more efficient and effective allocations in sectors that have a major fiscal and social impact (i.e., education, rural, health, social protection) and more equitable access to delivery of quality public services; and increased transparency and accountability of public finances through improved public expenditure management and strategic allocation of resources through medium-term budget planning, as well as strengthened procurement and audit functions.
„Azerbaijan has put on track many policy reforms, and now the PRSC is the Government’s vehicle to consolidate the reform efforts into a coherent program aimed at poverty reduction through promoting private sector development, improved delivery of social services, and transparency in public expenditure, all within a participatory framework,“ said Ahmed Jehani, Country Manager for Azerbaijan.
The PRSC has been provided on standard IDA terms with maturity of 35 years, including a 10-year grace period. Azerbaijan joined the World Bank in 1992. Since then, commitments to the country total approximately US$646 million for 27 operations.