Azerbaijan's fiscal position remains strong, although the consolidated surplus is narrowing as hydrocarbon revenues decline and expenditures increase, according to the international ratings agency Moody's.
The country's medium term fiscal framework reflects continued prudence, supporting low debt levels and further accumulation of buffers, The Caspian Post reports, citing local media.
"We expect the consolidated balance to come in at a surplus of 2.4% of GDP in 2025, narrowing from a surplus of 4% in 2024, primarily reflecting softer oil prices. Year-to-date through November, consolidated revenues reached AZN 43.9 billion against expenditures of AZN 36.8 billion, leaving a surplus of AZN 7.1 billion ahead of the seasonal December spending spike that typically compresses the year-end balance. Year-to-date as of November 2025, the consolidated surplus measures around 5.4% of our full year forecast for nominal GDP, with spending only at 77% of the full year budget.
The state budget, which incorporates transfers from SOFAZ, is projected to record a deficit of less than 1% of GDP in 2025, similar to 0.4% in 2024, as spending priorities continue to be toward reconstruction, social programmes, and infrastructure investment. As of November 2025, the state budget is in a surplus of AZN4.2 billion, 3.2% of GDP. It is not uncommon for Azerbaijan's state budget to shift from surpluses to deficits in the last month of the year as government agencies accelerate spending to meet targets," Moody's noted.
"SOFAZ transfers remain significant at AZN13.2 billion, as of November 2025 (around a third of state budget revenue), though a slight deterioration in the non-oil primary deficit was expected this year. As laid out in the latest medium term expenditure framework, we expect the downtrend in the non-oil primary deficit to resume as the government aims to advance non-oil revenue mobilisation and non-oil fiscal consolidation to reduce reliance on hydrocarbon windfalls.
The Medium-Term Expenditure Framework for 2026-2029 embeds oil price assumptions of $65 per barrel each year, alongside a gradual reduction in SOFAZ transfers and tighter control of primary current spending. The framework targets a reduction in the non-oil primary deficit to 13% of non-oil GDP by 2029 (from around 20% as of 2024), while maintaining a debt ceiling of 30% of GDP. As of mid-2025, public debt is projected at 19.6% of GDP, well below the ceiling and significantly below similarly rated peers and regional oil exporters, despite rising investment needs.
Continued adherence to fiscal rules and structural reforms, including diversification into non-oil sectors and green infrastructure, will underpin fiscal resilience and debt sustainability, even as fiscal deficits widen moderately and expenditure pressures persist. Underpinning Azerbaijan's fiscal strength is also the country's large fiscal buffers held in SOFAZ. Effective use of such fiscal buffers, which were used to fund pandemic - related spending, contained the deterioration in Azerbaijan's debt burden as compared with the median increase for peers of more than 10 percentage points of GDP over 2020-21.
Subsequent expenditure restraint thereafter amid supportive oil prices further proved greater management of such buffers, allowing SOFAZ assets to accumulate further instead of being deployed in a procyclical manner. As of September 2025, SOFAZ assets grew to $70 billion, which is around three times larger than the general government debt burden, from $60 billion at the start of the year."
($1=1.7 manats)
