Azerbaijan updates budget rule to improve fiscal transparency and efficiency

Azerbaijani President Ilham Aliyev has signed into law amendments to the “Budget System Law” approved by parliament on July 14, introducing significant changes to the country’s budget framework.

The updated law aims to enhance fiscal discipline and transparency by improving the classification of expenditures, managing treasury balances more efficiently, and refining the legal treatment of budget surplus and dividends from state-owned companies.

Key changes include:

Treasury account flexibility: Surplus funds in the single treasury account, resulting from uneven monthly spending, can now be managed more actively to generate additional revenue for the state budget.

Recognition of dividends: Dividends from entities with state shareholdings are now formally included as part of the state budget’s revenue sources.

Reclassification of capital expenditures: Costs related to state co-financing of investment projects will be classified under capital expenditures, aligning with the legal structure.

Unused funds in targeted budget funds will be transferred to the treasury’s free balance at year-end.

Simplified reporting: The administrative classification of expenditures will no longer be detailed in budget execution laws, in line with the Constitution’s separation of powers. Instead, expenditure data by institutions will be released via presidential decrees.

Medium-term and long-term planning: A new “long-term period” concept is introduced to complement the existing four-year “medium-term period,” with new rules for setting non-oil budget deficit ceilings every four years and coordinating interim targets annually with the Cabinet.

Clarification of definitions and streamlining of budget execution procedures are also included to ensure better alignment between planned and actual non-oil revenues.