By the end of 2026, according to IMF forecasts, annual inflation in Azerbaijan is expected to decline to 5% from 5.2% which was at the end of 2025, and by the end of 2027 - to 4%, provided external inflationary pressures ease and budgetary consolidation continues.
According to Report, this was stated by Anna Bordon, Head of the International Monetary Fund (IMF) mission to Azerbaijan, following a visit to Baku from February 4 to 17, 2026.
The IMF expects annual inflation to remain at 4% through 2032.
Meanwhile, medium-term inflation, according to IMF forecasts, is expected to be 5.2% in 2026 compared to 5.6% in 2025, 4.5% in 2027, and around 4% in subsequent years up to 2032.
"Driven mainly by external factors, inflation temporarily exceeded the upper bound of the Central Bank of Azerbaijan"s (CBA) target range, after which it returned within the range in the second half of 2025. Although inflation is projected to decline, careful monitoring of inflationary risks and responses to unexpected changes in inflation will be important, given heightened external uncertainty and the still-developing transmission mechanism of monetary policy," noted the IMF mission chief.
Interbank market rates, she said, remain close to the policy rate, reflecting successful management of excess liquidity by the Central Bank of Azerbaijan.
"Significant improvement in transmission to the broader economy will require further development of the risk-free yield curve and continued progress in addressing long-standing structural issues, such as dollarization, high operating costs, and low competition in the banking sector," she added.