Azerbaijan Critical After S&P Revises Rating

Azerbaijan criticised Standard & Poor's for resorting to what it said were "double standards" after the agency revised the country's sovereign credit outlook downward to negative on Friday.

S&P said Azerbaijan's fiscal and external balances would be hurt by the substantial drop in oil prices, and said the negative outlook reflected pressure on the manat currency from weaker terms of trade.

"The revision of Azerbaijan's rating by S&P is resorting to double standards," Vakhid Akhmedov, a lawmaker with the ruling party and a member of the parliamentary economic commission, told Reuters.

"The decline in oil prices won't have any negative effect on the execution of the state budget this year."

Economic growth in Azerbaijan, a former Soviet republic, slowed to 3 percent in 2014, nearly half the level seen the previous year, due to the slump in oil prices.

The oil-rich republic's 4.4-percent growth target for this year is seen at risk because it envisages oil at $90 a barrel - almost double where it has been trading.

And while Azerbaijan has been less affected that other former Soviet republics from the growing economic crisis in neighbouring Russia, the central bank sold nearly $1.13 billion to support the manat in December after a wave of currency devaluations in the region.

Nonetheless, Akhmedov dismissed the S&P decision.

He said 2.2 billion manats from the 20 billion manats ($26 billion) set in the 2015 budget revenues were expected to come from the oil sector, with another 10.3 billion manats from the state oil fund.

The $36 billion fund holds proceeds from oil contracts, oil and gas sales, transit fees and other revenues, and uses the proceeds on investments to help pay for social spending and infrastructure projects.

Akhmedov said Azerbaijan's debt stood at just 8 percent of the gross domestic product.

"With these indicators, it's absurd to talk about deteriorating economic stability," he said.

The International Monetary Fund sees growth in Azerbaijan at 3.5 percent this year and has urged Baku to reduce its reliance on oil.

Growth in the country has slowed dramatically since an oil-fuelled boom of 2003-2007, when the economy expanded by an average of 21 percent a year.

($1 - 0.78 manats)

Reporting by Nailia Bagirova; Writing by Margarita Antidze; Editing by Alison Williams)