Member Fact Sheet, April 2022

ADB's Work in Azerbaijan   Download Fact Sheet

Azerbaijan’s economic growth recovered shortly after the coronavirus disease (COVID-19) pandemic severely hit the economy and caused it to contract by 4.3% in 2021. Growth was supported by strong performance in manufacturing, transportation, retail trade, information and communication technology, and continued to rebound in services including the hospitality sector. The pace of vaccination remained stable, and 15% of the population has received booster shots, while 46% of the population was fully vaccinated.

The Asian Development Bank (ADB) is one of the country’s key sources of official development assistance. Current ADB operations in Azerbaijan are being implemented under the country partnership strategy 2019–2023, which aims to boost private sector development, raise public sector efficiency, improve infrastructure, and strengthen human capital. The strategy is closely aligned with the Government of Azerbaijan’s strategic road maps for the national economy and main economic sectors. As a chair of the Central Asia Regional Economic Cooperation Program in 2021, Azerbaijan actively supported the program’s agenda and hosted the virtual 20th Ministerial Conference.

ADB and Azerbaijan work together to help the country achieve more diversified, inclusive, and sustainable economic growth.

To date, ADB has committed 65 public sector loans, grants, and technical assistance totaling $3.7 billion to Azerbaijan. Cumulative loan disbursements to Azerbaijan amount to $3.93 billion. These were financed by regular and concessional ordinary capital resources. ADB’s ongoing sovereign portfolio in Azerbaijan includes 2 loans and 1 sovereign guarantee worth $856.8 million.

As part of its public finance management program, ADB continued the technical assistance to strengthen rules-based fiscal planning and develop public debt and liability management strategy. It also helps enhance the restructuring of state-owned enterprises and private sector participation, and improve access to finance and the business environment.

An ongoing $400 million Railway Sector Development Program supports the rehabilitation of the tracks and structure of the Sumgayit–Yalama rail line and facilitate railway sector reforms, including the corporate governance, operational efficiency, and financial sustainability of the Azerbaijan Railway Company.

Nonsovereign operations.Total outstanding balances and undisbursed commitments of ADB’s nonsovereign transactions in Azerbaijan as of 31 December 2021 was $14.86 million representing 0.11% of ADB’s total private sector portfolio.

Operational challenges.The government’s 10-year development strategy Azerbaijan 2030: National Priorities for Socio-Economic Development aims to develop sustainable and competitive economy, ensure social inclusiveness, achieve higher human capital, shift to “green growth”, and improve infrastructure. The government intends to reduce external debt level in the medium term and considers external borrowing with embedded innovation and high technology. ADB and the government are working closely to establish an environment for selective lending on such projects.

The Government of Azerbaijan also joined efforts with ADB to further strengthen compliance with the bank’s procurement, financial management (including project and entity audit), anticorruption, and environmental and social safeguards requirements. Special attention is placed on raising gender equality measures within projects, strengthening the governance and institutional capacities of implementing agencies, and promoting the financial sustainability of investments.

COVID-19 Response

In 2021, ADB assisted the government to implement its immediate COVID-19 response measures and provided a $250 million COVID-19 Active Response and Expenditure Support (CARES) Program as budget support for ongoing health, social protection, and macroeconomic stabilization measures. ADB also mobilized $100 million in cofinancing from the Asian Infrastructure Investment Bank to support the government’s pandemic response along with the CARES Program. ADB also provided a $250,000 technical assistance to support ongoing public financial management reforms such as the medium-term debt management strategy, rules-based fiscal management, and effective medium-term budgeting. It also aids in the implementation of mandatory health insurance and the social security system.

Knowledge Work

ADB scaled up its knowledge work in Azerbaijan to support the country’s knowledge and analytical needs. ADB is perceived in Azerbaijan as a unique source and facilitator of transfer of public and private sector knowledge and experiences from other countries in Asia and the Pacific. ADB provided a dedicated technical assistance to design the country’s knowledge management system and institutional set up. ADB-supported knowledge work included discussion notes and policy papers on fiscal management and tax administration, small and medium-sized enterprise development, corporate governance, and renewable energy.

Future Directions

ADB’s medium-term program in Azerbaijan focuses on the education, agriculture, public sector management, transport, and energy sectors. ADB will help the government intensify regional cooperation by strengthening regional transport connectivity. Energy reforms will be aided by building basic infrastructure for transmission and distribution and adopting innovative solutions. ADB assistance in the reconstruction of regional irrigation network will boost agricultural activity and ensure food security. Strengthening human capital through technical vocational education development intervention will also be prioritized to improve and build modern vocational schools and promote policy reforms. ADB’s private sector operations will engage in projects related to trade, finance, small and medium-sized enterprise expansion, and infrastructure development. ADB works closely with the government to make local currency financing available to the private sector through local currency bonds.