Moody's: IFIs can help bridge climate finance gaps in Azerbaijan

International financial institutions (IFIs) are poised to play a pivotal role in reducing climate adaptation funding shortfalls in Azerbaijan.

According to Report, citing a recent analysis by Moody's, the global credit rating agency, multilateral and bilateral development banks have significantly increased climate-related lending across Central Asia and the Caucasus over the past decade, complementing the rise in private sector investment.

The document emphasizes that while the primary burden of climate-related expenditures falls on governments and, to some extent, the private sector, IFI involvement is crucial in mitigating financial gaps and reducing sovereign credit risks for countries like Azerbaijan and Uzbekistan.

Moody's notes that regional governments are increasingly relying on concessional loans from IFIs. For instance, multilateral development bank financing accounts for: 36% of Azerbaijan's total public external debt; 26% in Uzbekistan; 25% in Georgia; and 22% in both Armenia and Tajikistan.

These figures far exceed the 2023 average of just 10% for middle-income countries.