Azerbaijan's external accounts come with an increasingly large SOFAZ asterisk

CAUCASUS / CENTRAL ASIA - In Brief 13 Jul 2026 by Ivan Tchakarov

---

Azerbaijan comes second in my analysis of the external accounts in the CCA region and the improvement it saw in its CA position in 1Q26 was not for the reason one may have anticipated. The CA surplus improved to 9.5 percent of GDP in the quarter from 2.4 percent of GDP in 4Q25 and 6.5 percent of GDP in 1Q25 (Graph 1). As usual, the positive trade balance lead the result, but, critically, exports were virtually unchanged relative to 4Q25 and actually lower than 1Q25. Hence, the Iran crisis that raised Azeri export prices to as high as US$130+bbl in Mar (vs the US$65bbl assumed in the budget) was not the main reason for the improvement vs the more relevant comparison period of 1Q25 (imports were indeed lower than those in 4Q25, but there is seasonality in imports as they tend to be lowest in the first quarter and highest in the last quarter of the year). The one item in the CA that has behaved systematically in a meaningful way to explain the difference between 1Q25 and 1Q26 performance has been the primary balance. Graph 1 CA surplus rose to 9.5 percent of GDP in 1Q26. Source: Central Bank, Author's calculations Indeed, there has been a steady improvement in the primary balance for the last four years. For Azerbaijan, the primary-income balance is structurally negative, largely because foreign companies operating in the country's hydrocarbon sector repatriate profits and dividends. The payments, accounted for as expenditures in Graph 2 vary with oil prices, so that, for example, they were very high in 2022, but have since stabilized at lower levels given the subsequent moderation of oil prices. What has, however, changed dramatically over the years is the constant and c...