Azerbaijan's current account surplus will reach $5.5bn this year and $4bn-4.4bn in 2026, central bank governor Taleh Kazimov said in an interview with Azerbaijan State Television and APA published July 29.

Strategic foreign currency reserves rose to $85.8bn in the first half of the year, up $700mn over six months, while the State Oil Fund transferred $3.77bn to the budget over the same period, Kazimov said.

The bank's forecasts point to average annual oil prices of $84.5 a barrel this year and $78 next year, with gas priced at $324 per 1,000 cubic metres in 2026 and $290 in 2027. Every $10 change in the oil price adds or subtracts around $1.2bn from the economy, while a $50 change in the average annual gas price moves revenue by around $900mn, Kazimov said.

Even at an average annual oil price of $45, the current account would remain in surplus given current production volumes, he said. The 2026 state budget is based on an oil price of $65 a barrel; a $10 change in that price would move the consolidated budget by AZN1.4bn (approximately $824mn), a sum Kazimov described as manageable through adjustments to capital spending.

Inflation is forecast to end 2026 at 5.9% and 2027 at 4.5%, within the central bank's target range. Kazimov said supply-side factors, chiefly imported inflation and regulated utility costs, are driving price growth far more than demand. A 10% rise in current budget spending adds just 0.29 percentage points to inflation, and a 10% rise in the bank credit portfolio adds 0.12 percentage points, he said.

On the exchange rate, Kazimov said the manat has faced appreciation pressure over the past 18 months, with supply exceeding demand in the currency market. The central bank sold $757mn at currency auctions in the first half of 2026, down from $2.7bn in the same period of 2025 and $3.5bn in the first half of 2024. Over the same six months, the bank conducted $1.5bn in purchase-side interventions to prevent the manat strengthening beyond the 1.7 per dollar rate.

Dollarisation of household deposits has fallen to 25% from 40% in 2021, Kazimov said, while manat-denominated deposits have more than doubled over four years, rising by AZN6.3bn to AZN12.5bn.

On lending rates, Kazimov rejected suggestions that the central bank should ease prudential requirements on business lending, saying Azerbaijan's rules are already lighter than Basel Committee standards and that the bank applies strict requirements only to consumer lending. Banks may lend up to AZN10mn-15mn to a single borrower without collateral; loans exceeding 10% of aggregate capital require collateral valued at 150% of the loan.

Kazimov said the cost of funds for banks stood at around 9%, with operational costs, credit risk premiums and margins pushing lending rates into double digits. He said changes of 3-4 percentage points in lending rates have limited effect on credit growth, noting that lending rates rose to 19% in July 2025 even as the SME loan portfolio grew 18% that year. Bank sector concentration, rather than the interest rate itself, remains the main constraint on competition, he said.

On financial sector development, Kazimov said Azerbaijan's sovereign rating reached investment grade in 2024, and the World Bank's Business Ready report ranked the country first among 101 countries for financial services. S&P's Banking Industry Country Risk Assessment placed Azerbaijan at seven out of ten in 2026, up from nine in 2023, ahead of most regional peers except Georgia and Kazakhstan.

Insurance sector premiums have risen 80% over four years to AZN1.5bn, with the sector investing around AZN1bn in securities and providing AZN700mn in bank sector liquidity, Kazimov said. A new capital markets law is due to be sent to relevant state bodies in September.

Two initial public offerings, by International Bank of Azerbaijan in 2024 and Pasha Bank in 2026, lifted the number of active investors at the National Depository Centre from 1,000 at the end of 2023 to more than 50,000, Kazimov said. The number of unique depositors in the banking sector reached 220,000 by the end of 2026, up from 114,000 at the end of 2023.

On digitalisation, Kazimov said 25 organisations, mostly banks, have joined the central bank's open banking platform launched in 2024, and 35 applications have been submitted to its regulatory sandbox, with seven pilots currently under way. Legislation on virtual assets has been submitted for approval, with implementing regulations expected within six months. The bank has not launched a pilot for a central bank digital currency and said it would focus instead on stablecoins next year.

Kazimov said the central bank's next financial sector development strategy, covering 2027-2030, is under preparation and will be presented in the first quarter of 2027. The current strategy, covering 2024-2026, was 85-85.6% implemented as of 2025.