In January, in US dollar terms, the external public debt burden was almost unchanged compared with a year ago, rising by US$400m. However, the devaluation of the manat and the collapse in export revenue led to a decline in GDP in dollar terms of 30% year on year. 

As a result, public external debt rose as a share of GDP to 19.8%, from 8.6% at the start of 2015. (Our estimates for public external debt are based on a wider definition of state liabilities published by the World Bank; however, we estimate

that it rose by a similar nominal amount in 2015.)

Azerbaijan's debt is largely owed to multilateral lenders at long maturities, which mitigates the risk of a financing crisis. According to official data, 58.6% of public external debt will mature in the next ten years. A further 32.9% is due in the 10-20 year timeframe.

Azerbaijan's public debt will rise further as a share of GDP in 2016 as lower oil prices and the impact of the December 2015 currency devaluation lead to a further contraction in GDP in dollar terms. Low oil prices and the sharp slowdown in the economy will also lead to a widening of the budget deficit this year. We currently forecast a deficit of Manat2bn in 2016, equivalent to 3.7% of GDP, with risks oriented to the upside. We will be amending our forecast for total public debt to 30.6% of GDP in our next forecasting round.

It is unclear, however, how much of this will be met by external borrowing. A visit by the IMF and World Bank to Baku, the

capital, in late January raised speculation that the government could be seeking a financing package. The government has

indicated that it intends to cover the deficit from domestic sources. If it wished, the government could cover its budget

deficit entirely from the State Oil Fund of the Republic of Azerbaijan (SOFAZ, the sovereign wealth fund).