Analysis by Emil Sanamyan
Azerbaijan’s Ilham Aliyev has ordered an unprecedented increase in mandatory minimum and public sector salaries last month in a move that was at least in part motivated by competition with Armenia.
Starting from September 1, minimum salaries will increase 42 percent, reaching the equivalent of $147 a month, about $7 more than in Armenia. Salaries for the military, police and various president-funded entities will also rise by 40 percent and for teachers by 20 percent. These raises come on top of increases in minimum wage and pensions already made last April.
Azerbaijani economist Gubad Ibadoglu told Berlin-based Meydan TV that new social spending will require cashing in some $3 billion from the State Oil Fund. This year the fund covered about half of Azerbaijan’s $15 billion budget. Depending on oil prices, next year the government could spend up to one-fourth of the Fund’s $42 billion in assets to support the budget.
Ibadoglu reasoned that rises were primarily intended to address growing inflation and associated public discontent.
However, in social media many commentators saw competition with Armenia as another pertinent factor. According to the latest official statistics, with the average salary of $326 a month, Azerbaijan trailed behind both Armenia ($370) and Artsakh ($338). The gap in salaries between Baku and provinces is particularly stark, with the capital’s residents on average making two or three times more. Yerevan residents also make more than the national average, but highest average salaries in Armenia are in mining-heavy Syunik province.
Azerbaijan had higher average salaries than Armenia until 2015 fall in oil prices and associated devaluation of its currency by nearly 50%. With prices rebounding in recent years, Aliyev now has an opportunity to once again make up the difference.
This would not be the first time that Azerbaijan’s leader makes spending decisions while having Armenia in mind. Prior to 2015 devaluation, Aliyev increased the size of Azerbaijan’s military spending specifically so that it would exceed the size of Armenia’s budget, and regularly used this point as an argument in Karabakh negotiations.
In the Meydan TV interview, Ibadoglu estimated that since the 1994 cease-fire Azerbaijan spent $26 billion on its military compared to $6 billion spent by Armenia.