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IMF says price hike likely to accelerate inflation in Azerbaijan

18 January 2007 11:34 (UTC +04:00)

The International Monetary Fund said the recent hike in utilities and energy on domestic market has caused the rice in consumer price inflation in the country. In order to find out whether the rise in energy prices directly result in the increase of prices in other sectors, the inflation should be differentiated from the change in energy price.
The IMF experts say that the recent energy and utilities price rise will only add 4% to 5% one-time (non-recurrent) direct increase to consume price index. Thereafter, the new energy prices might further increase the consume prices, but less than the said direct influence. This kind of inflation results from the factor that the supply fails to keep up with the increasing demand on the market.
The reportedly said 10%-15% rise in consumer prices is a quite noticeably increase caused by energy prices.
This rise is more likely to result from the expansionist macroeconomic and income policy pursued by the Government in 2006.
The experts say the Governmentâ€™s outline expenditures rose by 76%, additional to the salary rise in the public sector minimum salary was raised by 33% effective January 1, a 133% jerk occurred in manat circulation.
Restructuring of energy prices is favorable for re-planning of financial resources to direct untargeted subsidies to economic growth and poverty reduction. Inflation should promptly be reined by relevant macroeconomic and income policy so as to avoid from inflationary spiral of price and salary.
Coordinated and effective measures should be taken in Azerbaijan to thwart monopoly contributing to inflation. The quality of utilities should be improved, allocation of financial resources to fully compensate for the prices hike should be ensured within targeted social assistance program to prevent the living conditions of poor class of people from deteriorating. /APA/