Poverty remains a major challenge inAzerbaijan, where income poverty is spread throughout thecountry. This Poverty Assessment reviews available householddata, which suggest particular demographic characteristicsof the poor - no significant differences in the poverty rateby gender of the household head were recorded. However, thereport conveys the internally displaced people, are a coregroup of particularly vulnerable people, heavily dependenton state transfers, and donor assistance. Moreover, thereare serious concerns about the non-income indicators ofpoverty, including the quality of health care, andeducation, as well as access to basic services. The reporthowever highlights that the macroeconomic outlook forAzerbaijan is positive, and, it should be possible toachieve significant impact on poverty over the next tenyears, provided appropriate policies are followed. The oiland gas windfall should be a major benefit, contributing tolasting poverty reduction, and raising incomes. The strategyfor poverty reduction stipulates the need for increasedemployment rates, and productivity in the non-oil economy,accompanied by measures to strengthen, and improve theprovision of basic services, and infrastructure. Likewise, awell-targeted social assistance provision for vulnerablegroups should be considered, if a sustaining economic growthis to be attained, to be accompanied by targeted programs,focused on education and health programs. In addition,positive economic growth should be based on a vibrantprivate sector, resulting from a more liberal businessenvironment, improved financial intermediation and creditavailability to the enterprise sector, supported by a clearlegal framework, and implementation of the privatizationprogram, to enhance investments in human and physicalcapital. Regarding the rural sector, while the strategyshould aim at improving the incomes of the rural population,it should however emphasize the development ofnon-agricultural activities, i.e., food processing, andservices in rural areas.