Economist: Reforms Useless Without Clear Tax Code

In previous articles, we discussed the poor management of the budget and the corruption risks during its implementation phase[1]. Despite more than four years passing, we still share the same conclusions about the 2025 budget. This is because the budget work in Parliament is nominal, and the Ministry of Finance presents the budget for the following year to Parliament, with at least 40 percent of the budget’s classifications not detailed.

The restoration and reconstruction of Karabakh, liberated from occupation, are being carried out using state budget funds within the framework of the "I State Program on the Great Return to the Liberated Territories of the Republic of Azerbaijan." According to the Presidential decree approving the State Program,  implementation  the program's activities, including the status of the measures outlined, must be reported to the President of Azerbaijan twice a year.

The 2025 state budget plans an increase in transfers from the State Oil Fund by 13.3 percent or 1.7 billion manats compared to previous years, which deviates from the target indicator outlined in the “Strategic Road Map[1] for the National Economic Perspective of the Republic of Azerbaijan” by 2025. Although the Strategic Road Map aimed to reduce the specific weight of SOF transfers in budget revenues to 15 percent, it is expected that oil and gas revenues will make up 49 percent of budget revenues in the adjusted budget for 2024, amounting to 10.5 billion U.S. dollars, and 48.8 percent in 2025.

In terms of revenue and expenditure metrics, Azerbaijan leads the South Caucasus countries for the 2025 state budget. Azerbaijan's projected state budget revenues for 2025 are up to 2.5 times higher than Georgia's and more than three times higher than Armenia's. The 2025 state budget revenues are forecasted to increase by 1.928 billion AZN, or 5.3%, compared to the 2024 projection, reaching 38.316 billion AZN (equivalent to 22.5 billion USD at the current exchange rate).