ABSTRACT
According to forecasts from the Economist Intelligence Unit, the surging exports of oil and gas will help raise Azerbaijan’s GDP by about 25 per cent in 2006 and make it the fastest growing country in the world.2 The challenge imposed on the country will be to translate this temporary resource-driven stimulus to the economy into sustainable growth. Way too often resource-rich countries develop defi cient political systems that descend into a spiral of embezzlement, cronyism and wasted government expenditure, with large income disparities fuelling radical political or religious movements. And way too often non-oil sectors become uncompetitive and shrink greatly because export revenue is spent quickly rather than saved to meet long-term expenditure commitments or provide a capital stock for future generations after reserves are exhausted (Gylfason 2001; Sachs and Warner 2001). This chapter contributes to a still scattered literature on the resource boom in Azerbaijan. Our aim is to elucidate the changing patterns of the use of oil revenue and to appraise the extent to which the benefi ts from the oil boom are retained in the oil-producing regions or transferred to the rest of the country.
