S&P confirms Azerbaijan's sovereign credit ratings

The international rating agency S&P Global Ratings has confirmed the long-term and short-term sovereign credit ratings of Azerbaijan in foreign and national currency at “BB+/B” with a stable outlook.

The stable outlook reflects the agency's expectations that favourable hydrocarbon prices and growing gas exports will support Azerbaijan's financial position and balance of payments in 2022-2023, Report informs citing S&P.

"It [the stable outlook] also proceeds from the fact that there will be no return to an open military confrontation with Armenia, and the negative consequences of the Russian-Ukrainian war for Azerbaijan remain limited," S&P analysts say.
The agency may consider upgrading the rating if the high level of balance of payments surplus persists longer than expected, leading to a significant accumulation of external assets. "An upgrade could also come if the government implements reforms to remove some of Azerbaijan's structural hurdles, including limits to the effectiveness of monetary policy associated with increased dollarisation of residents' deposits and the country's still-weak banking system," S&P said.

Sovereign securities are rated in the “BB” category, and the agency considers Azerbaijan's fiscal and external equity positions to be among the strongest.

“The government has accumulated significant liquid assets, mainly within the State Oil Fund of Azerbaijan (SOFAZ). We project that the government will have access to liquid assets of about 60 per cent of GDP until 2025, while the total public debt will remain at about 20 per cent of GDP. In addition to strong inventory positions, current favourable oil prices also support Azerbaijan's budget and balance of payments performance,” the statement reads.