In recent years, Azerbaijan has made big progress in reducing poverty, economic growth and providing key social and infrastructure services. However, the country needs to make more concerted efforts to diversify the economy to reduce dependence on oil and gas revenues, maintain macroeconomic and fiscal sustainability, and develop human capital; states recently issued Country Economic Memorandum (CEM) for Azerbaijan. CEM, prepared by a team of the World Bank specialists in collaboration with their counterparts in the Government of Azerbaijan during more than one year, analyzes macroeconomic developments since the mid-1990s and challenges facing Azerbaijan today, the prospects of Azerbaijan’s non-oil economy, fiscal sustainability issues and management of public finances, and reviews situation and challenges, as well as gives recommendations for reforms in the utilities sector, business environment and financial sector. Issues related to Azerbaijan’s human capital, as a key ingredient of the country’s development as it prepares for the post-oil era, are considered in particular detail.