Azerbaijan - Country Partnership Framework for the Period FY25-29

FOR OFFICIAL USE ONLY Report No.195625-AZ INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENTANDINTERNATIONAL FINANCE CORPORATIONANDMULTILATERAL INVESTMENT GUARANTEE AGENCY COUNTRYPARTNERSHIP FRAMEWORK FOR THE REPUBLIC OFAZERBAIJAN FOR THE PERIOD FY25-29 December 17, 2024 South CaucasusCountry Management UnitEurope and Central Asia Region The International Finance CorporationEurope Region TheMultilateral Investment Guarantee Agency This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank Groupauthorization.Public Disclosure Authorized The last Country Partnership Framework was discussed by the Board onJuly 21, 2015, and the lastPerformance and Learning Reviewextending the CPF period was discussed by the Board onFebruary 6, 2020. FISCAL YEARJanuary 1–December 31 CURRENCY EQUIVALENTS(Exchange Rate Effective as ofNovember 30, 2024)US$1 = AZN 1.70 ABBREVIATIONS ACIPAgriculture CompetitivenessImprovement ProjectADBAsian Development BankAFadditionalfinancingAIartificial intelligenceAIFAgrarian Insurance FundAICACPAzerbaijan Investment Climate andAgricultural Competitiveness ProjectAIHAzerbaijan Investment HoldingAIIBAsian InfrastructureInvestmentBankASAadvisory services and analyticsASWRAAzerbaijan State Water ResourcesAgencyAzRIP2Second Azerbaijan Rural InvestmentProjectAZTAFAzerbaijan Rapid TechnicalAssistance FacilityAZUREAzerbaijan Scaling-Up RenewableEnergy ProjectCBARCentral Bank ofAzerbaijan RepublicCCDRCountry Climateand DevelopmentReportCEcitizen engagementCEMCountry Economic MemorandumCLRCompletion and Learning ReviewCO2carbon dioxideCOPConferenceof the PartiesCPFCountry Partnership FrameworkEBRDEuropean Bank for Reconstructionand DevelopmentEEenergy efficiencyEIBEuropean Investment BankESGenvironmental, social, and corporategovernanceESPEmployment Support ProjectEUEuropean UnionF4DFinance forDevelopmentFDIforeign direct investment FIMSAFinancial Market SupervisoryAuthorityFSMP2Second Financial SectorModernization ProjectFYfiscal yearGDPgross domestic productGHGgreenhousegasHLOhigh level outcomesGWgigawattIBRDInternational Bank forReconstruction and DevelopmentIDAInternationalDevelopmentAssociationIDPinternally displaced personIDPLSLP IDP Living Standards and LivelihoodsProjectIFCInternational Finance CorporationIEGIndependent EvaluationGroupJSSIPJudicial Services and SmartInfrastructure ProjectIMFInternational Monetary FundISWMPIntegrated Solid Waste ManagementProjectIPFInvestment Project FinancingMDDTMinistry ofDigital Development andTransportMIGAMultilateral Investment GuaranteeAgencyMPAMultiphase Programmatic ApproachMSMEsmicro,small,andmediumenterprisesMTEFMedium-Term ExpenditureFrameworkMTPMedium-Term PlanMWmegawattNDCsNationally DeterminedContributionsNPLnon-performing loan NSDSNational Statistical DevelopmentStrategyNSWMSNational Solid Waste ManagementStrategyO&Moperation and maintenancePEFAPublic Expenditure and FinancialAccountabilityPFMpublicfinancialmanagementPIRLSProgress in International ReadingLiteracy StudyPISAProgram for International StudentAssessmentPLRPerformance and Learning ReviewPPPpublic-privatepartnershipRCDPRegional Connectivity andDevelopment ProjectRErenewable energyRFresults frameworkSCDSystematic Country Diagnostic SECOSwiss Economic CooperationOrganizationSEDSSocio-Economic DevelopmentStrategy 2022-2026SGC CJSCSouthern Gas Corridor Closed JointStock CompanySMEssmall andmedium-sizedenterprisesSOCARState Oil Company of AzerbaijanSOEsstate-ownedenterprisesSOFAZState Oil Fund of AzerbaijanSPFState and Peace Building FundSSCState Statistical CommitteeTAPTrans-Adriatic PipelineTANAPTrans-Anatolian Natural Gas PipelineTFtrust fundVREvariable renewable energyWBGWorld Bank GroupWUAwater user association FY25-29COUNTRY PARTNERSHIP FRAMEWORKFORAZERBAIJAN Table of Contents I.INTRODUCTION..................................................................................................................1II.COUNTRY CONTEXT AND DEVELOPMENT AGENDA..............................................................22.1Social and Political Context.................................................................................................22.2Recent Economic Developments and Outlook......................................................................32.3Poverty and Shared Prosperity............................................................................................52.4Development Agenda.........................................................................................................6III.WORLD BANK GROUP PARTNERSHIP FRAMEWORK...........................................................103.1Government Program and Medium-term Strategy.............................................................103.2Proposed World Bank Group Partnership Framework........................................................103.3Objectives supported by the WBG