The President of the Republic of Azerbaijan, Ilham Aliyev, has signed a Decree “On additional measures regarding the use of targeted budget funds established within the state budget and the extra-budgetary funds of organizations financed from the state budget.” The Decree is significant in terms of increasing transparency, accountability, and efficiency in the management of public finances.
Orkhan Sadigov, Head of the Monitoring and Evaluation Division of the Center for Analysis of Economic Reforms and Communication, stated that the Decree serves to regulate the mechanisms for the use of extra-budgetary funds of organizations financed from the state budget based on a clearer and unified approach. According to him, the main substance of the document relates to clarifying the use of extra-budgetary funds for their intended purposes, establishing the legal framework for payments aimed at social protection, and ensuring more efficient management of these funds within the public financial system.
According to the Decree, the portion of the extra-budgetary funds of organizations financed from the state budget allocated to strengthening the social protection of employees will be used exclusively to strengthen the social protection of employees who do not hold administrative or auxiliary positions in those organizations in accordance with the Law “On Civil Service.” This approach will enable a more targeted and equitable distribution of social payments made from extra-budgetary funds.
The establishment of upper limits for payments made from extra-budgetary funds is also an important regulatory innovation introduced by the Decree. According to the document, supplements to official salaries are limited to up to 1.0 times the monthly official salary of each employee during a calendar month, while bonuses and other payments are limited to up to 20 percent of the annual payroll fund during a calendar year. This mechanism will create conditions for payments made from extra-budgetary funds to be carried out within a unified framework, expenditures to become more predictable, and financial discipline to be strengthened.
Orkhan Sadigov stated that another important direction of the Decree concerns the transfer of the remaining portion of extra-budgetary funds to the state budget. This will contribute to more efficient allocation of budgetary funds, increased fiscal transparency, and coordination of expenditures within the framework of the overall budget policy by strengthening the centralized management of public financial resources.
The Decree instructs the Ministry of Finance to prepare proposals regarding the abolition of targeted budget funds established within the state budget and the use of the revenue sources of these funds, the procedure for the formation, collection, use, and accounting of extra-budgetary funds, as well as the improvement of relevant normative legal acts. These instructions are significant in terms of continuing institutional renewal in public financial management and transitioning the accounting of extra-budgetary funds to a more systematic basis.
The Head of the Division of CAERC emphasized that the Decree is an important step toward strengthening the principles of discipline, transparency, and results-oriented management in public finance management. Regulating the use of extra-budgetary funds based on unified rules will both increase the targeting of payments aimed at social protection objectives and enable more efficient management of state budget resources.