ANTALYA, Türkiye, November 11. Azerbaijan’s Chamber of Accounts has proposed taking steps to introduce a “green budgeting” mechanism into the country’s budget planning process.
Chairman of the Chamber of Accounts Vugar Gulmammadov made the remarks during a joint meeting of four committees of the Azerbaijani parliament on November 11, where lawmakers discussed the draft law “On the State Budget of the Republic of Azerbaijan for 2027.”
Gulmammadov said that, in preparing its opinion on the 2027 state budget, the Chamber had used not only the budget package but also reports and statistical data from various government agencies, as well as studies by international organizations.
“First of all, I would like to note that we did not rely solely on the budget package in preparing our opinion. We also used reports from the Cabinet of Ministers of the Republic of Azerbaijan, reports and statistical data from central executive authorities, the Central Bank and the State Oil Fund, the findings of external public financial control measures and analyses conducted by the Chamber of Accounts, as well as reports and studies by reputable international organizations,” Gulmammadov said.
He noted that the Chamber’s opinion assesses whether the draft law on the 2027 state budget and the accompanying documents comply with legal requirements. It also evaluates the validity and completeness of revenue and expenditure forecasts, as well as the projected budget deficit. In addition, the Chamber analyzes whether these indicators are consistent with the country’s key macroeconomic parameters and strategic documents.
According to Gulmammadov, most of the issues raised in the Chamber’s previous opinions concerning improvements to public financial management, alignment with international practices, and the proper accounting of budget revenues and expenditures have been fully or partially addressed in the 2027 budget package. Discussions with relevant government agencies during the preparation of the opinion also resulted in certain changes to the budget documents.
Gulmammadov stressed that the documents submitted alongside the 2027 state budget draft comply with the requirements of the Law on the Budget System, including the principles of unity of the budget system and the independence of the budgets that form part of it. The draft was prepared on the basis of a unified budget classification, and work on it began within the timeframe stipulated by law.
He added that, alongside the draft budget, the Chamber had also received the ceiling for consolidated budget expenditures, information on tax benefits and exemptions, and consolidated budget projections for the next three years.
New approaches to budget and tax policy
The Chamber chairman said that the 2027 budget package provides more comprehensive information on budget and tax policy. However, the Chamber’s analysis indicates that further improvements are still needed.
According to Gulmammadov, medium-term revenue targets have been set for the first time as part of budget and tax policy. Taking into account the requirements of fiscal diagnostic tools, the Chamber considers it appropriate to apply a similar approach to expenditures.
Meanwhile, net financial assets recorded significant growth during the corresponding period of this year. The main driver was positive growth in the assets of the State Oil Fund.
“Bringing the components and calculation methodology of net financial assets into line with advanced international practices could make an additional contribution to the effective management of public finances,” the Chamber chairman said.
He also noted that the explanatory note accompanying the 2027 state budget draft contains more extensive information and analysis of risks affecting fiscal sustainability. Nevertheless, he stressed the need to continue efforts to improve the quality of information on these risks.
Reserve fund ceiling may rise to 7%
Gulmammadov also said that the 2027 state budget draft envisages amendments to several legislative acts, including the Law on the Budget System.
According to him, the proposed amendment to Article 6.2 of the law would increase the overall ceiling for the state budget’s reserve funds from 5% to 7%.
The Chamber chairman said that expectations of economic growth and inflation next year, improvements in tax administration and control mechanisms, and the additional revenue potential arising from proposed legislative amendments provide grounds to expect state budget revenues to significantly exceed this year’s level.
He added that, although transfers from the state budget to the Mandatory Health Insurance Fund are projected to increase next year, allocations to the Nakhchivan Autonomous Republic in the form of subsidies and transfers to the State Social Protection Fund are expected to decline as part of state obligations.
The 2027 state budget draft provides for allocations to both reserve funds within the limits established by law, the Chamber said.
Chamber of Accounts puts forward 35 recommendations
Gulmammadov said the Chamber of Accounts had made a total of 35 recommendations in its opinion on the 2027 state budget draft. They cover improving the quality of budget planning, strengthening fiscal transparency and enhancing public financial management.
He highlighted the importance of including in budget documents forecasts for all sources of budget deficit financing, with each component and its specific amount clearly indicated.
“We consider it appropriate to take steps towards introducing a green budgeting mechanism into the budget planning process,” Gulmammadov said.
Other recommendations highlighted by the Chamber chairman include revising Article 1.1.6 of the Law on the Budget System, which defines off-budget operations, and ensuring that expenditure targets, alongside revenue targets, are included when setting medium-term objectives.
The Chamber also proposed creating a separate paragraph in the unified budget classification for mandatory health insurance contributions, improving the state procurement mechanism and digitizing the process of drawing up state procurement plans.
In addition, the Chamber of Accounts recommended improving budget documentation to strengthen Azerbaijan’s position in the Open Budget Index and taking into account proposals concerning Articles 12, 16, 18 and 20 of the Law on the Budget System.
The Chamber’s opinion on the 2027 state budget covers an assessment of the draft’s revenue and expenditure parameters, fiscal risks, budget policy and public financial management mechanisms.
