Baku: Azerbaijan has announced a budget protection plan in response to declining oil prices, incorporating an average oil export price of USD 65 in its 2026 state budget. This strategy represents a cautious and conservative approach, as explained by Azer Amiraslanov, Chairman of the Milli Majlis Committee on Economic Policy, Industry and Entrepreneurship, during an interview with APA-Economics. While a drop in oil prices below this threshold could introduce fiscal risks, Azerbaijan's reserve funds, conservative budgeting, and focus on developing the non-oil sector are expected to mitigate these challenges.

According to Azeri-Press News Agency, Amiraslanov highlighted that the consolidated budget is more affected by oil prices compared to the state budget. In 2026, 42.6% of state budget revenues, approximately AZN 16.4 billion, will be sourced from the oil and gas sector. Of this, 78.1% or AZN 12.8 billion will come from transfers by the State Oil Fund, which are predetermined and unaffected by oil price fluctuations. Only 22% of oil and gas revenues, or AZN 3.6 billion, are susceptible to direct impacts from oil prices, specifically the revenues generated through tax authorities.

Amiraslanov further elaborated on the budget policy's main goal of ensuring medium- and long-term macroeconomic stability while also addressing short-term shocks. The plan includes several reserve mechanisms. First, the State Oil Fund serves as a stabilization tool, maintaining fiscal stability through transfers during price volatility. Second, increasing non-oil revenues, enhancing tax and customs administration, and reducing the shadow economy aim to lessen the budget's oil dependency. Third, optimizing non-priority expenditures could help sustain fiscal balance if needed. Lastly, a prudent public debt policy, characterized by a low debt burden and manageable borrowing strategy, provides an additional buffer against risks.