Assessment of Fiscal Losses from Occupation of Territories of Nagorno-Karabakh and Adjacent Regions of Azerbaijan

On October 21, in a tunnel located in the Sabunçu district of Baku, two drivers didn’t drown in rainwater, but rather lost their lives by suffocating in the corruption that pervades the sewer system. This incident highlights the inefficiency in the use of funds allocated from the state budget, World Bank loans, and the water payments collected from citizens. This article discusses the corruption pyramid built around the funds allocated to Azersu OJSC before the establishment of the Azerbaijan State Water Resources Agency, financial aid from the World Bank and other international organizations, as well as fees collected from water consumers, and the mismanagement of Baku city.

In a recent report, the Ministry of Finance of Azerbaijan disclosed details on the execution of the state and consolidated budgets for the first nine months of 2024. The report revealed that 64.6%, or 3.1376 billion manats, of the 4.8558 billion manats allocated for the reconstruction and restoration of the liberated territories has already been spent. Additionally, 61.4% of the funds earmarked for capital investments, amounting to 1.7289 billion manats, have been utilized.

Azerbaijan's public debt (including both external and domestic debt) is increasing, and by 2029, it is projected to reach 33.8 billion manats, which will be below 23% of GDP, according to materials from the Ministry of Finance. Under the "Public Debt Management Strategy" approved by the head of state in 2023, the upper limit for the public debt-to-GDP ratio should remain below 30%, and external debt should not exceed $10 billion.

The share of oil and gas revenues in replenishing Azerbaijan's state treasury remains high in 2024 and 2025, despite the trends of declining oil production (by at least 1 million tons in 2024) and falling European gas prices (half of Azerbaijan’s gas production is exported to Europe). This conclusion was reached by ASTNA after reviewing the medium-term public expenditure plan for 2025-28, published by the Ministry of Finance.