Fitch projects Azerbaijan's net sovereign creditor asset position grows up to 68.7% of GDP

Fitch projects Azerbaijan's net sovereign creditor asset position grows 10.9 percentage points (pp) in 2023-2024 to 68.7 per cent of GDP, comfortably the highest in the rating peer group.

Sovereign foreign-currency assets grew by $5.9 billion in 2022 to $58.0 billion, 85 per cent of which is held by the sovereign oil fund (SOFAZ) where higher energy revenues more than offset a 5.2 per cent loss on its investment portfolio, Report informs citing Fitch Ratings report.

The current account surplus rose an estimated 14.6pp in 2022. Oil and gas now comprise close to 93 per cent of Azerbaijan's total exports.

The rating is supported by Azerbaijan's very strong external balance sheet, the lowest public debt in its peer group, and financing flexibility from large sovereign wealth fund assets.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

- Public Finances: Greater confidence that the strong public balance sheet will be preserved, for example, due to continued expenditure restraint in line with the fiscal rule, or prolonged high energy prices

- External Finances: Further strengthening of the external balance sheet, for example, due to sustained high energy prices

- Macro: Improvements in the effectiveness and predictability of Azerbaijan's policy framework, including exchange rate policy, to manage external shocks and reduce macro volatility

Fitch Ratings has affirmed Azerbaijan's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BB+' with a Positive Outlook.