IMF calls on Azerbaijan to boost private investment, economic reforms for long-term growth

The International Monetary Fund (IMF) has urged the Azerbaijani government to continue its efforts in creating conditions that foster private investment, minimize fiscal risks, and implement critical reforms aimed at strengthening the country’s economy.

Azerbaijan’s "Azerbaijan 2030" strategic priorities highlight the pivotal role of the private sector in driving economic growth, investment, and job creation, Caliber.Az reports via local media.

In line with this vision, the Azerbaijani government has already made strides in simplifying business operations and licensing procedures and has taken steps to develop the country’s financial markets. The IMF report emphasizes several key reforms necessary for continued progress, particularly focusing on reducing state involvement in the economy and improving the efficiency of state-owned enterprises (SOEs).

The Azerbaijan Investment Holding (AIH) was established in 2020, followed by the creation of the Azerbaijan Transport and Communications Holding (AZCON) in 2024. AIH has already implemented key measures to enhance corporate governance, including the formation of supervisory boards, the introduction of key performance indicators (KPIs), independent audits, and improved financial reporting. 

Based on an OECD review, an action plan has been developed to further strengthen corporate governance in SOEs, including the development of asset ownership policies, ensuring fair competitive conditions, introducing independent members to boards of directors, increasing transparency, and moving forward with a privatization roadmap. The IMF also highlighted Azerbaijan’s progress in strengthening anti-corruption policies and promoting transparency, noting that the country ranked 23rd out of 125 nations in the 2023 Open Budget Index. 

However, the IMF recommends the country pass a conflict-of-interest law, implement more transparent public procurement procedures, create an asset declaration system for public officials, and adopt the recommendations set out by MONEYVAL, including the creation of a centralized register for beneficial ownership and more stringent anti-money laundering measures.

Additionally, the IMF stressed the importance of improving access to financing for Azerbaijan’s private sector. While the banking system has reached a stable level, the IMF pointed out that financial and securities markets remain underdeveloped, limiting business growth and private investments. 

To address these challenges, the IMF recommends enhancing corporate governance in the private sector, improving the quality of accounting and auditing practices, modernizing the legal framework, and expanding financing access for small and medium-sized enterprises (SMEs). The IMF also acknowledged that Azerbaijan’s financial sector development strategy for 2024-2026 is appropriately focused on addressing these barriers to growth and investment.

By Naila Huseynova