Azernews.Az

The Asian Development Bank (ADB) has unveiled a forward-looking Country Partnership Strategy (CPS) for Azerbaijan for 2025–2029, reaffirming a long-standing partnership that has played a key role in the country’s development journey. Over the past decades, ADB has been a strategic ally in supporting Azerbaijan’s transformation from early-stage infrastructure development to more recent ambitions in green energy, digitalization, and economic diversification.

As Azerbaijan transitions toward a post-oil economy, international financial institutions like ADB continue to be instrumental in bridging funding, knowledge, and policy expertise. The new CPS goes beyond traditional development finance, it reflects a deeper shift in priorities: from growth at all costs to growth that is inclusive, climate-resilient, and innovation-driven.

Structured around the pillars of value creation, integration, and resilience, the strategy aims to align with national priorities such as the "Azerbaijan 2030" vision and the Socioeconomic Development Strategy 2022–2026, while offering flexibility to adapt to global uncertainties.

Over the past two decades, Azerbaijan has demonstrated steady progress, with GDP per capita rising from $663 in 2000 to $7,284 in 2024. While oil and gas continue to play a central role in the economy, the government’s ongoing efforts to diversify are showing promising signs. ADB's support will further accelerate this transition, directing investment and policy focus toward non-oil sectors such as agriculture, services, and small and medium-sized enterprises (SMEs).

The strategy promotes:

• Greater economic resilience by reducing reliance on hydrocarbons

• New job creation in growing sectors

• Strengthened innovation and productivity through skills and digital transformation

These areas are vital for unlocking Azerbaijan’s untapped potential, particularly in regional economies beyond the capital.

Climate commitments turn into action

ADB’s CPS takes a strong position on environmental sustainability, acknowledging Azerbaijan’s growing leadership in climate adaptation. Although Azerbaijan contributes minimally to global greenhouse gas emissions, it faces serious local climate challenges—many of which are now being addressed through national policy and international cooperation.

Positive highlights include:

• A National Climate Adaptation Plan adopted in 2024

• Clear targets to grow the share of renewable energy from 20.3% to 42.5% by 2035

• Support for climate-resilient infrastructure, green finance, and water resource management

ADB’s involvement in these areas will help Azerbaijan implement practical, lasting solutions to mitigate environmental risks while advancing the green economy.

Social inclusion and human capital gains

The strategy rightly recognizes that sustainable growth must benefit everyone. Azerbaijan has maintained a low poverty rate of 5.3%, and ADB is helping build on that progress through targeted investments in education, healthcare, and social protection.

Encouraging developments include:

• 100% net enrollment in primary education, and strong progress at secondary levels

• Health sector reforms aimed at improving maternal and child outcomes

• Policies to enhance gender equality and women's economic participation

By prioritizing human capital development, the CPS supports long-term competitiveness while reducing regional and social disparities.

Strengthening the financial and private sector landscape

Azerbaijan’s financial sector, while bank-dominated, is undergoing reform to better serve SMEs and expand inclusion. With ADB’s help, more small businesses will gain access to credit, digital services, and growth opportunities.

Key improvements under way:

• Support for capital market growth and financial innovation

• Expanded access to formal savings and credit systems, particularly for women and rural communities

• Implementation of the Sustainable Finance Roadmap (2023–2026) to guide climate-aware financial sector reform

These reforms create a more dynamic and inclusive economy where entrepreneurship and innovation can flourish.

Connecting regions and building peace

Azerbaijan’s strategic location continues to offer major regional connectivity advantages. Under the CAREC program, new investments in roads, rail, and logistics are expanding the country’s role as a regional hub for trade between Central Asia, the South Caucasus, and Europe.

In addition:

• Trade volumes are increasing along CAREC Corridor 2

• Peacebuilding progress with Armenia could enhance cross-border infrastructure and economic cooperation

• ADB is actively supporting improvements in transport efficiency and logistics capacity

Such developments help boost competitiveness and integrate Azerbaijan more fully into global value chains.

ADB is also playing a critical role in improving public financial management, making sure public resources are used effectively and transparently. This is essential for investor confidence and for ensuring citizens benefit from government programs.

Key results include:

• Tax-to-GDP ratio increased from 14.4% to 17.5% between 2019 and 2024

• Strengthened fiscal rules and debt management frameworks

• Continued efforts to reform and modernize state-owned enterprises (SOEs)

With governance improvements, Azerbaijan is well positioned to attract foreign direct investment and foster a more competitive business environment.

The 2025–2029 CPS reflects both confidence in Azerbaijan’s economic direction and a realistic assessment of its development needs. It is aligned with the country's strategic goals—Azerbaijan 2030 and the Socioeconomic Development Strategy 2022–2026—and offers tailored support to ensure implementation is both flexible and impactful.

ADB’s engagement goes beyond funding. It provides:

• Expertise and knowledge support for complex reforms

• Collaborative work with local institutions and civil society

• Close coordination with global partners including UNDP, World Bank

Azerbaijan’s trajectory is clear: from a resource-based economy to one that is diversified, competitive, and green. The new CPS from ADB is not just a continuation of past cooperation—it’s a signal of deepened trust and a shared vision for long-term prosperity.

With strategic reforms under way and international support firmly in place, Azerbaijan is better equipped than ever to lead in regional trade, sustainability, and inclusive growth.