The International Monetary Fund has completed its Article IV consultation with Azerbaijan, with the Executive Board endorsing the staff appraisal on a lapse-of-time basis. The Fund said growth slowed to 1.4 percent in 2025 because of oil-sector technical disruptions and weaker nonhydrocarbon activity, and it identified sustained fiscal consolidation and private-sector-led diversification away from hydrocarbons as the main policy priorities, even as higher oil and gas prices from the war in the Middle East are expected to strengthen near-term fiscal and external positions while raising inflation risks. IMF staff expects growth to recover only modestly to about 2.1 percent in 2026, with oil GDP still contracting, nonoil growth strengthening to 3.7 percent, and end-2026 inflation rising to 6.0 percent. Despite combined Central Bank of Azerbaijan and State Oil Fund of Azerbaijan reserves reaching USD 85 billion at end-2025, the external position was assessed as substantially weaker than the level consistent with medium-term fundamentals and desirable policies. The Fund backed the authorities’ fiscal rule target of reaching 13 percent of nonoil GDP in 2029 and said any hydrocarbon windfall should be saved, while also calling for clearer revenue and expenditure measures, tighter fiscal-rule design, policy-rate increases if inflation pressures persist, further work on monetary policy transmission, continued Basel III and risk-based supervision implementation, stronger financial safety nets, and state-owned enterprise reforms including lower subsidies, better governance, and gradual divestment. The authorities requested additional time to decide whether to publish the staff report, with a final decision expected within 28 days of the Board consideration date. The IMF recommended that the next Article IV consultation remain on the standard 12-month cycle.
International Monetary Fund 2026-04-30
International Monetary Fund concludes Azerbaijan Article IV and urges fiscal consolidation as growth slowed to 1.4 percent
The IMF’s Article IV consultation with Azerbaijan projects slower 2025 growth of 1.4 percent due to oil-sector disruptions and weaker nonhydrocarbon activity, and prioritizes sustained fiscal consolidation and private-sector-led diversification away from hydrocarbons. Despite combined Central Bank and State Oil Fund reserves of USD 85 billion at end-2025, the external position is deemed substantially weaker than warranted. The Fund backs the fiscal rule target of a 13 percent of nonoil GDP balance by 2029 and urges saving hydrocarbon windfalls, clearer fiscal measures, possible policy-rate hikes, continued Basel III and risk-based supervision, stronger financial safety nets, and state-owned enterprise reforms. The authorities requested more time to decide on publishing the staff report, and the next consultation is expected in 12 months.