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Moody's conducts periodic review of Azerbaijan and related ratings

17 January 2026 08:30 (UTC +04:00)

The international rating agency Moody’s Ratings has conducted a periodic review of Azerbaijan and related ratings, APA-Economics reports, citing the agency.

Azerbaijan's ratings, including its Baa3 long-term issuer ratings, are supported by the government's large net creditor position given sizeable financial assets held by the State Oil Fund of Azerbaijan (SOFAZ), the country's sovereign wealth fund, which provides a significant financial buffer and lowers government liquidity and external vulnerability risks. Its policy effectiveness is also improving, although from a low base. In particular, improvements in the monetary and macroeconomic policy framework promote stability in the external position and financial system soundness in the face of shocks, while effective deployment of fiscal buffers allows for countercyclical spending and limits the potential deterioration in the government's fiscal and debt metrics.

Balanced against these credit strengths, long-standing institutional and governance weaknesses weigh on economic competitiveness and strained – though improving - relations with neighbouring Armenia (Ba3 stable) underpin geopolitical risks.

Azerbaijan's "ba1" economic strength reflects solid medium-term growth prospects against its significant exposure to the oil and gas sector. Institutions and governance strength is scored at "ba2" which balances weaknesses in control of corruption and rule of law, as well as limited voice and accountability, against gradually underpinned by the country's strong net creditor position, as the size of sovereign wealth assets covers all of the government's direct debt and guarantees, notwithstanding the high share of foreign currency debt. Azerbaijan's "ba" susceptibility to event risks is driven by strained but improving geopolitical relations with Armenia. Azerbaijan's ESG Credit Impact Score is negative (CIS-4), indicating that the rating is lower than it would have been if ESG risk exposures did not exist. This primarily reflects Azerbaijan's negative exposure to environmental risks, particularly long-term global carbon transition, with moderate exposure to social and governance risks. Its governance profile remains moderately weak, though it is gradually strengthening amid ongoing reforms. The positive outlook reflects our view that ongoing reforms could further reduce economic and fiscal dependence on the hydrocarbon sector beyond our expectations. Moreover, there are prospects for further enhancements in institutional strength and governance amid ongoing reforms to enhance monetary policy transmission, financial sector regulations, public finance management and transparency in public administrative processes.