Azerbaijan's parliament on Friday approved a 2015 budget that sharply boosted military spending in apparent response to rising tensions with neighbour Armenia over the disputed Nagorny Karabakh region.

The oil-rich Caucasus country's defence outlays will rise by 8.6 percent to more than 1.78 billion Azerbaijani manats ($2.3 billion, 1.8 billion euros).

The budget also expects the economy to expand by 3.6 percent this year and 4.4 percent in 2015.

Azerbaijan is locked in a long-simmering conflict with Armenia over Karabakh.

Ethnic Armenian separatists backed by Yerevan had seized control of the territory during a 1990s war that left some 30,000 dead, and no peace deal has yet been signed.

An unprecedented spat of violence has erupted this year with the arch-foes' forces regularly exchanging fire across their border and along the Karabakh frontline, sparking fears of a major escalation in the conflict.

Baku, whose military spending exceeds Armenia's entire state budget, has threatened to take back the region by force if negotiations fail to yield results. Armenia, which is heavily armed by Russia, says it could crush any offensive.