Ways to ensure the sustainability of the pension system in the Republic of Azerbaijan

Abstract

The article provides a comprehensive analysis of the sustainability of the pension system of the Republic of Azerbaijan in the context of contemporary demographic and economic challenges. Using statistical comparative analysis and forecasting methods, the study examines key indicators such as the ratio of pension expenditures to GDP, the ratio of active to passive insured persons, the old-age dependency ratio, the pension replacement rate, the ratio of the minimum pension to the subsistence minimum for pensioners, as well as projections of mandatory state social insurance revenues and expenditures of the State Social Protection Fund through 2030.The findings indicate that although the share of pension expenditures in GDP increased during 2006–2024, a 65% rise in the number of insured persons and an improvement in the active-to-passive ratio from 2.4 to 4.7 significantly strengthened the financial sustainability of the system. The minimum pension exceeding the subsistence minimum by 137.9% ensures the social adequacy of pension benefits. Forecast results suggest continued growth in social insurance revenues; however, by 2030 these revenues are expected to fall short of fully covering fund expenditures. The article emphasizes the importance of investing pension fund assets and expanding digitalization as key policy directions for enhancing the long-term sustainability of the pension system.