Baku: The Chamber of Accounts has introduced new proposals aimed at reducing Azerbaijan’s public debt, as detailed in their commentary on the draft law “On the State Budget of the Republic of Azerbaijan for 2025”. The budget deficit for the upcoming year is projected at 3.1 billion manat, with plans to finance 1.8 billion manat through domestic government borrowing. This move is expected to increase domestic debt primarily through government bonds, highlighting potential risks such as interest rate risk due to rising interest expenses, refinancing risk from the necessity to refinance debt, and liquidity risk related to securing adequate funds in financial markets.

According to Azeri-Press News Agency, the Chamber of Accounts emphasized the importance of addressing these risk factors. Interest expenses on debt service are projected to be 308 million manat higher than the previous year. The domestic debt portfolio is currently dominated by short-term debts, and there are varied dynamics in the average yield of
government bonds. This scenario underlines the need for careful attention to these risks.

The Chamber further reported that for the first ten months of the current year, state budget revenues have exceeded expenditures by 3 billion manat, raising expectations for significant budget surpluses by year-end. They propose creating an enforcement mechanism to pay overdue obligations directly from the free balance. Moreover, they suggest reconsidering the avoidance of borrowing in a surplus budget environment and the early redemption of short-term bonds from investors, considering monetary policy objectives. These measures are expected to not only reduce the state debt but also help prevent a substantial increase in interest costs in the future.