BAKU, Azerbaijan, April 7. Azerbaijan’s
financial sector demonstrated macroeconomic stability and continued
progress in digital transformation during the first quarter of the
year, Trend
reports, citing the Central Bank of Azerbaijan (CBA).


Foreign exchange reserves of the Central Bank rose to $11.6
million, reflecting a year-on-year increase of 5.7%, while the
country recorded a foreign trade surplus of $1.1 billion in the
first months of the year. Annual inflation stood at 5.7% in
February, with price increases observed across food products,
alcoholic beverages, tobacco (6.8%), services (5.7%), and non-food
goods (3.7%). Core inflation was recorded at 5.6%.


As of February 28, 2026, Azerbaijan’s banking sector comprised
22 operating banks with a network of 505 branches, 85 departments,
and 3,507 ATMs. Total banking assets stood at 57.1 million manat
($33.5 million), while liabilities reached 49.6 million manat
($29.1 million), and balance capital totaled 7.51 million manat
($4.42 million). During the reporting month, the sector’s credit
portfolio expanded by 0.5%, or 138.8 million manat ($81.6 million),
to 30.1 million manat ($17.7 million), with business loans
accounting for 53.3%, consumer lending for 31.4%, and mortgage
loans for 15.3%. In the first two months of 2026, banks generated
189.7 million manat ($111.5 million) in net profit and 301.2
million manat ($177.1 million) in operating profit, while
contributing 47.7 million manat ($28 million) in profit tax.


Public finances also showed a positive trajectory over the same
period. State budget revenues reached 6.31 million manat ($3.71
million) from January through February 2026, exceeding projections
by 0.9%, while expenditures totaled 4.8 million manat ($2.82
million). The consolidated budget was executed with revenues of 7.5
million manat ($4.41 million) against expenditures of 5.33 million
manat ($3.14 million).


Meanwhile, conditions in the foreign exchange market remained
stable, with purchases of cash foreign currency exceeding sales by
$51 million. The level of dollarization among resident individuals’
deposits declined to 27.7%, while the monetary base stood at 23.7
million manat ($13.9 million).


Within the framework of international cooperation, Finance
Minister Sahil Babayev held talks with the World Bank on advancing
water and agricultural projects, while representatives of the
International Monetary Fund (IMF) visited the region to review
ongoing reconstruction and infrastructure initiatives. A delegation
from the Ministry of Finance also traveled to Serbia to exchange
expertise on digital public finance management and budget planning,
as Azerbaijan continued to deepen cooperation with Slovakia and the
Black Sea Trade and Development Bank in the economic and energy
spheres.


On the digital front, President of the Republic of Azerbaijan,
Ilham Aliyev, approved the regulations governing the "Digital State
Finance" Information System (RDMIS), designed as a unified platform
for budget planning, financial oversight, and the monitoring of
public debt and investment projects. Complementing this,
legislative amendments were adopted to establish clear mechanisms
for the provision of bank secrecy data to the Ministry of
Finance.


Further reinforcing transparency and modernization efforts, the
Ministry of Finance launched the "e-budget.maliyye.gov.az"
Electronic Budget Guide portal during the first quarter of the
year. The platform is intended to broaden public participation in
budget processes, enhance transparency and efficiency, and
consolidate financial data into a single, accessible system.
Officials подчеркнули that the portal represents a key component of
broader institutional and digital reforms, enabling the centralized
collection and management of information on both state and
consolidated budgets.


During the reporting period, Bank BTB OJSC was restructured into
a non-bank credit institution (NBCI), with its assets and
liabilities transferred to the International Bank of Azerbaijan
(IBA). Authorities emphasized that the transformation poses no
risks to creditors or depositors.


Additionally, the CBA signed a cooperation agreement with
UnionPay aimed at expanding non-cash payments, boosting card
issuance, and advancing the integration of QR-based technologies.
In parallel, a draft law on the crypto-asset market is expected to
support the development of the fintech ecosystem and improve access
to digital financial services.







International rating agencies and analysts continue to deliver
favorable assessments of Azerbaijan’s financial stability and the
outlook for its banking sector. According to Fitch Ratings, many
local banks are already aligned with Basel III requirements, and
the implementation of these standards is unlikely to materially
affect their credit portfolios. The agency notes that lending
activity remains largely concentrated in the trade and services
sectors, with limited exposure to oil and gas companies,
contributing to the overall stability of the loan structure.


Fitch further highlights the country’s strong fiscal
flexibility, low level of public debt, and ongoing improvements to
the regulatory framework. At the same time, it points to lingering
uncertainties regarding the division of responsibilities between
the State Oil Fund and the Central Bank.


The international rating agency Moody’s forecasts that
Azerbaijan’s public debt will stand at 23.9% of GDP in 2026 and
23.8% in 2027. According to the agency, the cost of servicing this
debt will remain within 6-7% of budget revenues, indicating a
comfortable position in terms of fiscal sustainability.


The Dutch banking group ING highlights the continued growth of
Azerbaijan’s foreign exchange reserves and the stability of the
manat. Analysts note that stronger external buffers, a surplus in
the consolidated budget, and the appreciation of regional
currencies are reinforcing exchange rate stability. In addition,
relatively moderate inflation and economic growth create room for
potential interest rate cuts in the medium term.


S&P Global Ratings has upgraded its assessment of
Azerbaijan’s banking sector risk from 8 to 7, citing improved
regulatory oversight and declining credit risks. The agency
emphasizes that alignment with Basel III standards, stricter stress
testing, and the introduction of resolution mechanisms will further
strengthen the sector’s resilience. Ratings for several banks,
including PASHA Bank and Kapital Bank, have been affirmed with a
positive outlook, while a potential IPO by PASHA Bank is expected
to bolster capital buffers.


The International Monetary Fund (IMF) projects that Azerbaijan’s
public debt will amount to 20.7% of GDP in 2026 and decline to
below 20% by 2032. The share of state-guaranteed debt is expected
to remain stable, with the average maturity of external debt
standing at 5.1 years.


Overall, international financial institutions and analysts
consistently assess Azerbaijan’s financial system as stable,
highlighting strengthened regulatory frameworks, improved capital
positions in the banking sector, and a public debt trajectory that
poses no significant risk to macroeconomic stability.


Taken together, these indicators suggest that in the first
quarter of 2026, Azerbaijan’s financial sector preserved its
resilience, sustained its development trajectory, and continued
advancing its digital transformation agenda while deepening
international cooperation.