Page 35 - Caucasus Outlook 2025

potential abroad.
The 2025 state budget also reflects Azerbaijan's focus on prudent debt management amidst rising borrowing levels. As of October 1, 2024, Azerbaijan’s total public debt stood at AZN26.2bn, equivalent to 21.6% of projected GDP. This marks a 52.3% y/y increase, driven largely by a surge in domestic borrowing to support long-term financial market development and reduce reliance on external debt.
The debt structure reveals AZN9bn in external debt, representing 7.4% of GDP, a decline of 18.9% compared to the previous year. In contrast, domestic debt rose sharply to AZN17.2bn, or 14.2% of GDP, reflecting a 2.8-fold increase. The government attributes this shift to its targeted strategy of replacing external debt with domestic borrowing, as outlined in the Medium- and Long-Term Public Debt Management Strategy. This policy aims to support the development of the domestic securities market and establish a stable yield curve for medium- and long-term borrowing instruments.
The currency composition of external debt highlights US dollars as the dominant component, accounting for 86.1%. Other currencies include euros (6.1%), Japanese yen (3.4%) and Special Drawing Rights (3.7%), with minor exposure to other currencies at 0.7%. Fixed-rate obligations constitute 51.7% of external debt, while variable rates account for 48.3%. The repayment structure shows that 48.5% of external debt is due within five years, 44.5% within five to ten years, and 7% beyond ten years.
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