Azerbaijan's banking sector, fiscal reforms receive positive IMF review

The International Monetary Fund (IMF) has expressed a positive evaluation of Azerbaijan's ongoing efforts to strengthen its banking sector and improve fiscal transparency.

In an interview with AZERTAC, Anna Rose Bordon, the head of the IMF mission in Azerbaijan, emphasized that the banking sector remains broadly resilient, thanks to the Central Bank of Azerbaijan's commitment to enhancing financial sector regulation and reinforcing the prudential oversight, corporate governance, and risk management standards of local banks, Caliber.Az reports.

The IMF also praised Azerbaijan's continuous efforts to increase public finance transparency. Bordon noted that the government has made significant strides in monitoring and assessing fiscal risks, strengthening the budget legislation system, and implementing a fiscal rule. The country’s progress in this area was further highlighted by its ranking 23rd out of 125 nations in the 2023 Open Budget Survey, which evaluates the transparency of the budget process.

A key part of Azerbaijan’s reform efforts is digitalization, which the IMF identifies as a critical tool for improving institutional frameworks. The IMF recommends expanding digital initiatives in revenue administration and procurement processes to enhance fiscal transparency. Additionally, the development of digital financial services, such as open banking and fintech, is seen as essential for fostering competition and increasing financial inclusion, particularly for small and medium-sized enterprises (SMEs).

The IMF concluded its Article IV consultation mission with Azerbaijan in March 2025. During this consultation, the IMF emphasized the importance of fiscal consolidation, further enhancements to the monetary policy framework, and the adoption of structural reforms aimed at promoting economic diversification and sustainable growth. The IMF also highlighted the need for continued investment in the financial sector’s resilience. Despite these challenges, the IMF confirmed that Azerbaijan does not require a loan program, as the country possesses adequate financial buffers.

However, Azerbaijan faces significant challenges in diversifying its economy, especially given its limited hydrocarbon reserves and the ongoing global energy transition. The IMF stresses that the government must continue to attract private investment, mitigate risks to public finances, and pursue essential reforms. These include improving the performance of state-owned enterprises, enhancing governance, and facilitating greater private sector access to finance.

By Vafa Guliyeva