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Azerbaijan's energy sector is crucial for its economy, contributing significantly to fiscal revenues and exports, according to Anna Rose Bordon, head of the IMF mission in Azerbaijan. She noted that the global energy transition and reduced fossil fuel demand threaten the long-term sustainability of the hydrocarbon-dependent economy, making economic diversification essential.

The government is urged to attract private investment through reforms in state-owned enterprises, governance improvements, and enhanced access to finance. Azerbaijan's third Nationally Determined Contribution (NDC) includes plans to decarbonize its electricity sector by 2035, focusing on modernizing infrastructure, increasing renewable energy generation, particularly solar and onshore wind, and reducing reliance on natural gas, which accounted for 21% of total greenhouse gas emissions in 2022.