Financial Crime World

Azerbaijan’s Public Financial Management: Progress and Challenges

Tbilisi, Georgia - Azerbaijan’s Path to Improving its Public Financial Management System

Over the past decade, Azerbaijan has made significant progress in strengthening its public financial management (PFM) system. However, despite these efforts, several challenges remain, hindering the country’s ability to effectively manage its finances.

Weaknesses in Budget Planning, Execution, and Monitoring

According to a recent report by the World Bank, Azerbaijan’s PFM system is still plagued by weaknesses in budget planning, execution, and monitoring. The country’s financial management is also hindered by a lack of transparency and accountability in government spending.

Key Challenges Facing Azerbaijan

  • Improved Budgeting Practices: The country’s budget process is characterized by a lack of flexibility, with the budget being passed without change after limited discussion in Parliament.
  • Strengthened Institutional Capacities: While some agencies have made progress in developing their financial management and procurement skills, many line ministries and subnational government entities still require significant improvement.
  • Information Technology (IT) and E-Government: The country’s IT systems are either absent or not utilized to a great extent, hindering the timeliness and coverage of cash flows and investment appraisal.

Progress Made

  • Targeted Social Assistance Program: Implemented a well-regarded management information system (MIS), considered one of the best in the region.
  • Chamber of Accounts: Playing an important role in auditing the budget and extra-budgetary funds, but further strengthening is needed to ensure effective oversight and accountability.

Conclusion

While Azerbaijan has made progress in strengthening its PFM system, significant challenges remain. To address these challenges, the government will need to prioritize reforms aimed at improving budgeting practices, institutional capacities, and IT systems. Only through such efforts can Azerbaijan effectively manage its finances and achieve sustainable economic growth.

Sources:

  • World Bank. 2010. Country Partnership Strategy for Azerbaijan for the Period FY 11-14.
  • Group of States Against Corruption. 2006. Joint First and Second Evaluation Rounds: Evaluation Report on Azerbaijan.
  • Group of States Against Corruption. 2010. Joint First and Second Evaluation Rounds: Addendum to the Compliance Report.

Photo: The State Budget in Azerbaijan (Source: Ministry of Finance, Azerbaijan)