LAW OF THE AZERBAIJAN REPUBLIC

of May 22, 2007 No. 334-IIIQ

About public debt

This Law regulates implementation of state loans and provision of the state guarantees, and also the relations between the subjects who are taking part in national debt management.

Article 1. The basic concepts used in this Law

This Law uses the following concepts:

1.1. public debt - the debt which is subject to payment according to obligations from the agreements signed on behalf of the Azerbaijan Republic;

1.2. internal public debt - the debt which is subject to payment according to obligations from the agreements signed on behalf of the Azerbaijan Republic with residents of the Azerbaijan Republic;

1.4. the state guarantee - the financial liability which was undertaken by the Azerbaijan Republic according to the procedure, established by this Law on complete or partial obligation fulfillment before the creditor on debt in case of not return to the creditor by the main borrower of debt according to conditions and terms of return coordinated with the creditor;

1.5. state loan - attraction for certain term on behalf of the Azerbaijan Republic of financial resources in case of coordination with the creditor of conditions of their return by residents and nonresidents of the Azerbaijan Republic;

1.5. state loan - attraction for certain term on behalf of the Azerbaijan Republic of financial resources in case of coordination with the creditor of conditions of their return by residents and nonresidents of the Azerbaijan Republic;

1.6. the register of public debts and state garantiyreestr, conducted in the procedure established by this Law for the purpose of accounting of public debts and state guarantees and management of them;

1.7. the main borrower - the legal entity having debt on the obligation guaranteed by the state;

1.8. the user - the legal entity or the state body using based on the repeated agreement the debt means received by state loans and provided to return at the expense of the government budget;

1.9. the repeated agreement - the agreement signed between relevant organ of the executive authority and the main borrower, determining conditions of distribution, use and return (does not extend to users) state loans and/or means received under the state guarantee;

1.10. the repeated borrower - the legal entity using based on the repeated agreement the debt means received by state loans and not provided to return at the expense of the government budget;

1.10-1. refinancing of public debt - repayment by the body (organization) established by relevant organ of the executive authority of the available public debt by the financial means raised by means of new state borrowing;

1.11. Fund of providing - the off-budget state fund founded without formation of legal entity, created according to article 13.1 of this Law.

Article 2. Legislation of the Azerbaijan Republic on public debt

2.1. The legislation of the Azerbaijan Republic on public debt consists of the Constitution of the Azerbaijan Republic, the Law of the Azerbaijan Republic "About the budget system", this Law, other legal acts of the Azerbaijan Republic and international treaties which participant is the Azerbaijan Republic.

2.2. If international treaties which participant is the Azerbaijan Republic establish rules, different from regulations of this Law, provisions of international treaties are applied.

Article 3. State loans of the Azerbaijan Republic

3.1. The procedure for attraction of debts on behalf of the Azerbaijan Republic and provision of guarantees is established by relevant organ of the executive authority.

3.2. For the purpose of ensuring accomplishment of obligations on the public debt and debt guaranteed by the state the assets of the Azerbaijan Republic, its international reserves and assets belonging to the state which will arise in the future cannot be pledged.

3.3. Loans of the Nakhchivan Autonomous Republic are performed according to the legislation of the Azerbaijan Republic.

3.4. Loans of the Central Bank of the Azerbaijan Republic are regulated by the Law of the Azerbaijan Republic on National Bank.

3.4-1. The procedure for receipt of loans by Fund of deposit insurance and their providing with the state guarantee is regulated by the Law of the Azerbaijan Republic "About deposit insurance".

3.5. The Azerbaijan Republic does not bear responsibility on debt obligations of the state companies except as specified of provision of the state guarantee.

Article 4. Purpose of state loans

State loans are performed for the purpose of providing the programs aimed at the social and economic development of the country, covering of central government budget deficit, financing of the state investments and the solution of other questions established by the legislation of the Azerbaijan Republic.

Article 5. National debt management

5.1. The relevant organ of the executive authority manages public debt.

5.2. In process of management of public debt the following is performed:

5.2.1. the strategy of state loans of the Azerbaijan Republic is prepared;

5.2.2. conditions of debt obligations, opportunities for attraction of financial resources from the financial markets are estimated;

5.2.3. observance of upper limits (limits) of public debt and the state guarantees established by the Law of the Azerbaijan Republic about state the budget for the corresponding year is provided;

5.2.4. servicing of the public debt and debt which arose under the state guarantee, and their timely return is provided;

5.2.5. necessary measures for enhancement of structure of the public debt and debt which arose under the state guarantee are taken;

5.2.6. operations on repeated financing of public debt taking into account requirements of article 25.3-1 of the Law of the Azerbaijan Republic "About the budget system" and repeated structurization of debt obligations are performed;

5.2.7. transparency of the processes connected with public debt and the state guarantees is provided in the procedure established by the legislation.

5.3. Refinancing of external public debt is performed by the body (organization) established by relevant organ of the executive authority in coordination with the body (organization) established by relevant organ of the executive authority.

Article 6. Upper limit (limit) of public debt

6.1. In the Law of the Azerbaijan Republic on the government budget for the corresponding year taking into account the need for additional financing in connection with implementation of the state programs providing social and economic development of the country, and other indicators of public debt (the debt relation to the gross domestic product, the debt relation to export volume of goods and servants, the relation of maintenance expenses of debt to budgeted expenses, etc.) the following is established:

6.1.1. upper limits (limits) of internal and external public debt, and also the amount of the state guarantee provided within the year attracted within fiscal year;

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