Azerbaijan : Countercyclical Support Facility Program

Sovereign Project | 50145-001

The proposed Countercyclical Support Facility will, in the short term, help the government of Azerbaijan mitigate the significant negative economic impact caused by the crash in oil prices and the recession in the country's trading partners, which has triggered recession in the country. The government''s ongoing and planned fiscal stimulus expenditure is providing social assistance programs, creating employment, and promoting inclusive private sector development. The attached TA will facilitate design of structural reforms covering macro fiscal management, state-owned enterprise (SOE) reform, and finance sector development as well as augment capacity of select departments for implementation of the reforms. The medium-term structural reforms could be supported further under a planned policy-based loan in 2017.

Project Details

  • Project Officer
    Farinha Fernandes, Joao Pedro
    Central and West Asia Department
    Request for information
  • Country/Economy
    Azerbaijan
  • Modality
  • Sector
    • Public sector management
Project Name
Countercyclical Support Facility Program
Project Number
50145-001
Country / Economy
  • Azerbaijan
Project Status
Closed
Project Type / Modality of Assistance
  • Loan
  • Technical Assistance
Source of Funding / Amount
Loan 3486-AZE: Countercyclical Support Facility
Source Amount
Ordinary capital resources US$ 500.00 million
TA 9259-AZE: Improving Public Sector Efficiency
Source Amount
Technical Assistance Special Fund US$ 1.20 million
TA 9259-AZE: Improving Public Sector Efficiency (Supplementary)
Source Amount
Technical Assistance Special Fund US$ 100,000.00
Strategic Agendas
  • Inclusive economic growth
Drivers of Change
  • Governance and capacity development
  • Knowledge solutions
  • Private sector development
Sector / Subsector
  • Finance / Finance sector development

  • Public sector management / Public expenditure and fiscal management - Social protection initiatives

Gender
No gender elements
Description
The proposed Countercyclical Support Facility will, in the short term, help the government of Azerbaijan mitigate the significant negative economic impact caused by the crash in oil prices and the recession in the country's trading partners, which has triggered recession in the country. The government''s ongoing and planned fiscal stimulus expenditure is providing social assistance programs, creating employment, and promoting inclusive private sector development. The attached TA will facilitate design of structural reforms covering macro fiscal management, state-owned enterprise (SOE) reform, and finance sector development as well as augment capacity of select departments for implementation of the reforms. The medium-term structural reforms could be supported further under a planned policy-based loan in 2017.
Project Rationale and Linkage to Country/Regional Strategy
Sharp economic downturn caused by drop in oil prices. Azerbaijan''s economy has been experiencing a series of distresses, which has led to a lower growth rate, fiscal uncertainty, and finance sector instability. Oil prices have fallen sharply, by almost 57% from their peak in 2014 to August 2016. Given that oil and gas revenues account for about 30% of gross domestic product (GDP), 60% of budget revenues, and over 90% of country's exports, the crash in oil prices had a significant negative effect on the economy. All components of GDP experienced a sudden drop including government expenditures, investments, consumption and net exports. GDP growth fell from 2.8% in 2014 to 1.1% in 2015. Azerbaijan entered into recession, with negative GDP growth of 3.0% in the first 7 months of 2016 and a negative 2.4% forecast for 2016. The recession stems from lower hydrocarbon revenues, contraction in public investments (especially construction effecting private sector activity), and a tightened domestic demand. The current account surplus evaporated from 14.0% of GDP at end-2014 to a deficit of 0.4% at end-2015. Lower commodity prices resulted in a 47% decrease in export revenues in 2015, while the inflow of remittances (mainly from the Russian Federation) suddenly dropped by 31% to $1.2 billion hitting, in particular, the rural population. The currency devaluation of major trading partners put substantial pressure on the national currency manat with a sharp decline in foreign exchange supply. Assets of the State Oil Fund of Azerbaijan (SOFAZ) declined by $3.5 billion to $33.6 billion (9.5%) in 2015, limiting the fiscal space for budget transfers and leading to a reduction in economic activities financed by SOFAZ.
Impact

Broad-based inclusive growth sustained (Azerbaijan 2020: Look into the Future)

Project Outcome

Description of Outcome

Expenditures for fiscal stimulus maintained

Progress Toward Outcome
To be assessed.

Implementation Progress

Description of Project Outputs

Measures to provide social safety net to citizens implemented

Measures to facilitate social housing implemented

Measures to create additional jobs implemented

Measures to identify and initiate specific structural reforms for economic diversification implemented

Status of Implementation Progress (Outputs, Activities, and Issues)
To be assessed.
Geographical Location
Nation-wide

Safeguard Categories

Environment
C
Involuntary Resettlement
C
Indigenous Peoples
C

Summary of Environmental and Social Aspects

Environmental Aspects
Categorized as 'C' since the project is not expected to have impacts on Environment.
Involuntary Resettlement
Categorized as 'C' since the project is not expected to have impacts on Involuntary Resettlement.
Indigenous Peoples
Categorized as 'C' since the project is not expected to have impacts on Indigenous Peoples.

Stakeholder Communication, Participation, and Consultation

During Project Design
During Project Implementation

Business Opportunities

Consulting Services
There are no consulting services needed under the loan. Under the attached technical assistance, a total of 18 person-months of international consultancy services and 33 person-months of national consultancy services will be required intermittently. A consulting firm has been recruited in recruited and fielded in June 2017. The firm's inception report was received by ADB in September 2017. The interim report was approved in April 2018, while the midterm report was submitted in September 2018.
Procurement
There are no procurement activities required under the loan.

Contact

Responsible ADB Officer
Farinha Fernandes, Joao Pedro
Responsible ADB Department
Central and West Asia Department
Responsible ADB Division
Public Management, Financial Sector and Trade Division, CWRD
Executing Agencies
Ministry of Finance

Timetable

Concept Clearance
21 Jul 2016
Fact Finding
19 Jul 2016 to 27 Jul 2016
MRM
29 Aug 2016
Approval
07 Dec 2016
Last Review Mission
-
Last PDS Update
28 Sep 2018

Funding

Loan 3486-AZE

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
07 Dec 2016 08 Dec 2016 23 Dec 2016 28 Feb 2017 - 02 Feb 2017
Financing Plan
  Total (Amount in US$ million)
Project Cost 500.00
ADB 500.00
Counterpart 0.00
Cofinancing 0.00
Loan Utilization
  Date ADB Others Net Percentage
Cumulative Contract Awards 17 Jun 2022 500.00 0.00 100%
Cumulative Disbursements 17 Jun 2022 500.00 0.00 100%

TA 9259-AZE

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
07 Dec 2016 03 Jan 2017 03 Jan 2017 31 Jan 2019 31 Jan 2021 01 May 2021
Financing Plan/TA Utilization
ADB Cofinancing Counterpart Total
Gov Beneficiaries Project Sponsor Others
1,300,000.00 0.00 0.00 0.00 0.00 0.00 1,300,000.00
Cumulative Disbursements
Date Amount
17 Jun 2022 1,256,559.65

Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.

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Safeguard Documents See also: Safeguards
Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.

None currently available.


Evaluation Documents See also: Independent Evaluation

Title Document Type Document Date
Azerbaijan: Countercyclical Support Facility Program Validations of Project Completion Reports Oct 2020

Related Publications

None currently available.


The Access to Information Policy (AIP) establishes the disclosure requirements for documents and information ADB produces or requires to be produced in its operations to facilitate stakeholder participation in ADB's decision-making. For more information, refer to the Safeguard Policy Statement, Operations Manual F1, and Operations Manual L3.

Requests for information may also be directed to the InfoUnit.

Tenders

No tenders for this project were found.

Contracts Awarded

No contracts awarded for this project were found

Procurement Plan

None currently available.