BAKU, Azerbaijan, December 6. The assets of Azerbaijan’s State Oil Fund (SOFAZ) are expected to exceed external debt through 2028 and the net international investment position averaging about 76% of GDP, Trend reports via the S&P Global Ratings.
“Azerbaijan's external balance sheet remains one of its strongest credit features, underpinned by the sizable foreign-currency assets accumulated in SOFAZ. These buffers provide substantial insulation against external shocks. We expect external liquid assets to remain above the country's external debt stock through at least 2028, while the net international investment position averages about 76% of GDP over 2025-2028. Although the economy remains exposed to terms-of-trade volatility, the scale of Azerbaijan's net external asset position should materially mitigate the impact of adverse price cycles on external liquidity and the broader economy. We expect the current account to remain close to 3% of GDP on average during 2025-2028, shifting into a small deficit by 2028 as hydrocarbon output plateaus and import demand rises alongside investment needs,” reads the report issued by S&P.
S&P analysts note that current budget discussions indicate that the government will target a central government deficit of around 2.3% of GDP for 2026, based on an oil-price assumption of US$65 per barrel (/bbl).
“Our baseline oil price forecast is slightly more conservative--US$60/bbl in 2026, rising to US$65/bbl in 2027-2028--implying some downside risk to the revenue envelope relative to official assumptions. Even so, we expect the consolidated general government position to remain in surplus over 2025-2028, averaging a deficit of 1% of GDP. Although the medium-term fiscal framework projects recurrent state budget deficits through 2029, such projections have historically proven conservative, given lower-than-planned expenditure execution and ongoing SOFAZ savings.”