Fitch expects higher-than-budgeted oil prices and non-oil revenue growth to underpin continued surpluses, despite increased reconstruction spending in Garabagh, the international credit ratings agency Fitch Ratings noted, Paralel.Az-economics reports.

The agency noted that Azerbaijan has delayed by one year (to 2027) the targeted reduction in the non-energy primary deficit to 17.5% of non-oil GDP (from 25% in 2023) under its fiscal rule, to accommodate expenditure commitments related to Garabagh.

The government also increased its public debt ceiling to 30% of GDP (previously 20%), the agency added. Fitch considers that the rule has a limited record, and a weak institutional framework in terms of oversight and establishment of fiscal targets.

Government debt rose to 21.8% of GDP in 2023 following the government taking over 8% of GDP domestic guaranteed debt from Agrarkredit. Fitch forecasts debt to average 21.6% of GDP in 2024-2025, the lowest in the 'BB' category. External government guarantees and on-lending declined to USD6 billion (8.2% of GDP) in 2023, with most of this related to the Southern Gas Corridor project, which is profitable and not likely to require sovereign support.