Azerbaijan slashes defence spending as oil revenues fall

By bne IntelliNews October 6, 2016

Azerbaijan's draft budget for 2017 sees defence spending lowered by 27.5% y/y to AZN1.62bn (€890mn), Eurasianet reported on October 3.

Azerbaijan used to make headlines for its large military spending, having acquired some €4bn worth of armament from Russia in recent years. The country is currently at war with neighbouring Armenia over the breakaway region of Nagorno-Karabakh and seven surrounding territories, and Yerevan has watched worriedly as Baku's military capabilities expanded.

However, a windfall in oil and gas revenues since 2014 has forced Baku to cut its spending. Seeing how the Azerbaijani manat lost 50% of its value in two consecutive devaluations in 2015, the spending declined by more than 27.5% in euro terms.

Defence spending used to be disguised under the term “special projects and activities” in the state budget, although the term was scrapped in 2015, Eurasianet reports. Baku has allocated AZN2.9bn to internal security and defence for next year.

Overall, Baku has cut its spending by 10% y/y to AZN18.9bn. 

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