Thank you @Vitaliy Kurokhtin for the comment.

The reason you're facing the issue is due to wrong syntax, APIM requires expressions to be enclosed in @(...), not "@{...}".

• Wrapping the code inside @(...) ensures it is evaluated before being assigned.

• Use DateTime.UtcNow Instead of DateTime.Now , this will avoid time zone inconsistencies.

• Since APIM policies are written in XML, double quotes (") inside the `value` attribute must be escaped as `"`.

Replace your existing policy with the following,

<inbound>
    <base />
    <set-query-parameter name="timestamp" 
        value="@(Uri.EscapeDataString(DateTime.UtcNow.ToString(&quot;yyyyMMddHHmmssfff&quot;) + &quot;+0000000&quot;))" />
</inbound>

Please refer MsDoc1, MsDoc2 for better understanding of APIM policy expression, Set query string parameter respectively.