Currently, AAP does not support “Entra ID authentication or Managed Identity” for Azure PostgreSQL to use local identities for integration for database access.
However, we approved guidelines do not allow for Azure PostgreSQL to use local identities for integration for database access, to ensure compliance with identity federation and conditional access policies.
We want AAP to support Entra ID authentication or managed Identity for Azure PostgreSQL.

FYI...Our Internal security team not accepting AAP product into production.