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Qabil Ashirov

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Azerbaijan's foreign debt stands at a modest 7.2 percent of its Gross Domestic Product (GDP), a figure that has caught the attention of analysts and policymakers alike. In comparison with countries around the world, especially developed ones, Azerbaijan's external debt is strikingly low. President Ilham Aliyev recently addressed this topic in an interview with local media outlets, pointing out that in most developed countries, the external debt surpasses 100 percent of GDP. In contrast, Azerbaijan’s 7.2 percent is a remarkable achievement, a testament to the country’s sound economic management.

The Azerbaijani president emphasized that this relatively low level of foreign debt is a reflection of the country’s economic stability. He noted that international rating agencies, which assess countries' creditworthiness, should recognize this achievement and offer a more balanced view of Azerbaijan's economic standing. According to President Aliyev, the country’s fiscal prudence has allowed it to maintain a favorable debt-to-GDP ratio, even as other nations continue to struggle with much higher levels of debt.

In a further demonstration of the country's fiscal strength, President Aliyev highlighted Azerbaijan's foreign exchange reserves, which exceed its external debt by a remarkable 14 times. The president remarked that the country’s economy is stable and self-sufficient, relying primarily on its own resources rather than external financing.

Moreover, the president announced that Azerbaijan has begun to explore options for slightly increasing its external debt in the future. While acknowledging that the current debt levels are low, he noted that a gradual increase could be considered as the country seeks to diversify its investments and expand its infrastructure.

It is worth noting that Azerbaijan’s prudent approach to managing foreign debt places it in a favorable position compared to many developed nations. With a low debt-to-GDP ratio, substantial foreign exchange reserves, and a strong domestic economy, the country has demonstrated financial stability and independence. As Azerbaijan continues to pursue its development goals, it will likely remain cautious in its approach to external borrowing, ensuring that its economic growth is sustainable and its debt levels manageable. This careful management, along with ongoing efforts to enhance domestic resources, positions Azerbaijan as a model of fiscal responsibility not only in the region but also in the world.

Speaking to Azernews on the issue, Raza Syed, the editor of the London Post, noted that Azerbaijan's external debt of $5.2 billion, constituting 7.2% of its GDP, positions the country as a global leader in fiscal health and financial stability. Compared to most developed countries, where external debt often exceeds 100% of GDP, Azerbaijan's debt-to-GDP ratio is remarkably low.

“This strong fiscal discipline indicates a sustainable financial position and significantly reduces the country's vulnerability to debt-related crises. Prudent financial management has ensured that Azerbaijan is not overly reliant on external borrowing to fund its development, thereby promoting a stable economic environment,” Raza Syed pointed out.

As for the debt ratio to foreign exchange reserves, the R.Syed noted that surpassing its external debt by 14 times, the reserves underscoring the country's robust financial resilience. This ample liquidity allows Azerbaijan to meet its external obligations without the need for additional borrowing or external financing.

“Such a high level of reserves acts as a significant buffer against economic shocks, including fluctuations in oil prices, currency depreciation, and external market volatility. This financial strength enhances investor confidence and contributes to the stability of the Azerbaijani economy,” he said.

Raza Syed added that to ensure continued economic growth and long-term financial stability, Azerbaijan should focus on several key policy measures. Diversification of the economy is crucial; shifting from reliance on the energy sector to developing non-oil sectors such as agriculture, technology, and manufacturing will enhance long-term resilience and reduce dependence on commodity exports.

“Prioritizing infrastructure development, particularly in transportation, digitalization, and energy efficiency, will provide a strong foundation for growth. Concurrently, investing in education and workforce skills will help Azerbaijan transition to a knowledge-based economy, ensuring sustainable development,” he said.

Syed opined that as the external debt may increase, it is vital to manage it prudently to avoid fiscal strain. He noted that new debt should be directed towards productive investments that generate high returns, ensuring that the debt-to-GDP ratio remains manageable with a carefully monitored repayment schedule.

“Additionally, Azerbaijan should strategically capitalize on its substantial foreign exchange reserves by investing in sovereign wealth funds or other long-term assets that generate returns, thereby contributing to wealth generation for future generations.

Building a resilient financial system capable of withstanding external shocks is essential. Strengthening local banks, improving financial market transparency, and promoting financial inclusion will ensure that economic growth is inclusive and sustainable, supporting the broader economy over the long term. By implementing these measures, Azerbaijan can maintain its strong economic foundation and achieve continued prosperity,” the editor Raza Syed concluded.