Azerbaijani wrestlers' protest a sign of Baku's economic woes

Azerbaijani wrestlers' protest a sign of Baku's economic woes
Togrul Asgarov, centre, took silver in the 65kg category in men's freestyle wrestling at the 2016 Rio Olympics. He won gold (60kg) at the 2012 London Olympics. / Ilgar Jafarov.
By bne IntelliNews July 31, 2017

Azerbaijan's wrestling team is threatening to skip the 2017 World Championship set to take place in Paris in August to protest against unpaid wages, website haqqin.az reported on July 28.

Wrestling is one of the sports in which Azerbaijani athletes are the most competitive, with the country being a serious contender for the team title and individual wrestlers occupying top-10 positions in various weight classes according to Flo Wrestling. Promoting sports has over the years been one of the pet projects of President Ilham Aliyev, who chairs the country's Olympic committee. Despite the fact that Azerbaijan does not have a strong sporting culture, the country has hosted several international competitions in recent years - two Formula 1 races, the European Games of 2016 and Islamic Solidarity Games in 2017. 

That even some of its top athletes like Olympian wrestlers Togrul Asgarov and Haji Aliyev would be owed several months' of unpaid wages speaks to the dire straits which the Azerbaijani state budget is in. On Friday, Asgarov and Aliyev, together with the men's freestyle and Greco-Roman teams, held a protest saying that they would not participate in training activities and could skip the world championship in Paris.

Azerbaijan's economy has been in a downward spiral ever since oil and gas prices began to drop in 2014. In 2016, the economy contracted by 3.8% y/y; the World Bank anticipates a further 1.4% y/y contraction in 2017. Since hydrocarbons account for a third of economic output, two-thirds of budget revenues and over 90% of export revenues, the volatility in oil markets has also affected Baku's ability to meet its previous budget commitments, with the budget sliding into deficit for the first time in a decade last year.

The notoriously opaque regime in Baku has sought to bury news and evidence of its economic downturn, with the Aliyev administration promptly cracking down on protests over unemployment and inflation in early 2016 and resorting to populist moves such as an increase in social spending to appease the population. The wrestlers' protest is therefore a rare glimpse into the true state of affairs in Azerbaijan, where other state employees (the government accounts for more than half of the 1.5mn jobs in the country) could be quietly struggling with similar problems. 

On July 28, ratings agency Standard& Poor's (S&P) reaffirmed the country's long- and short-term local and foreign currency ratings at 'BB+/B' with a negative outlook, warning of the risk that the country's position in foreign currency markets was weakening due to imbalances in the balance of payments.

While Baku has over $39bn in foreign reserves shored up in sovereign wealth fund Sofaz and the central bank, pressures on its reserves have emerged from all sides this year. Sofaz spent some $4bn in 2016 propping up the currency, which has depreciated steeply since 2015, and is to devote an equal amount to salvaging the crisis-stricken banking sector this year.

The country's largest lender, state-owned International Bank of Azerbaijan (IBA) defaulted on $3.3bn worth of foreign obligations in May, adding to the government's debt burden - the bank's obligations will be swapped for sovereign ones. Since 2015, Baku is estimated to have taken over some $10bn worth of bad assets from IBA. 

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