IMF Staff Completes 2019 Article IV Mission to Turkmenistan

April 10, 2019

End-of-Mission press releases include statements of IMF staff teams that convey preliminary findings after a visit to a country. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF's Executive Board for discussion and decision.
  • Economic growth was affected last year by the moderation of public investment and bank lending and a more active use of foreign exchange regulations, which compressed private demand and imports.
  • Enhancing competitiveness and improving currency convertibility, moving to a market-based economy, and building human capital are essential for achieving sustainable, diversified, and inclusive growth, without a widening in external imbalances.
  • Greater transparency and better economic statistics would help attract private foreign and domestic investment and improve access to financing, while supporting decision making and credibility.

An International Monetary Fund (IMF) mission led by Ms. Natalia Tamirisa visited Ashgabat during March 26-April 9, 2019 to assess macroeconomic and financial developments and discuss economic challenges and policy priorities with senior government officials, representatives of the business and financial sectors, and the diplomatic community. At the end of the visit, Ms. Tamirisa issued the following statement:

“The economy has slowed because of declining public investment and a more active use of foreign exchange regulations, which have weighed on private investment and consumption. The resulting significant decline in imports, together with higher-than-expected hydrocarbon prices, have turned the external balance into a surplus. The improvement in the external balance is likely to be temporary, given that the official exchange rate remains above the equilibrium value, investment is expected to rise, and the outlook for hydrocarbon prices is subdued. Risks are tilted to the downside, stemming from the possibility of lower-than-expected return on past investment, rising external financing costs, and geopolitical and regional uncertainties.

“Achieving the authorities’ development goals without widening external imbalances requires improving competitiveness and currency convertibility, while further moderating public investment and credit growth. Adjustment measures should be carefully sequenced and accompanied by an assessment of their impact on the vulnerable and well-targeted social protection.

“Accelerating market-oriented reforms and building human capital are crucial to sustain and diversify economic growth and make it more inclusive. Key steps include privatizing state-owned enterprises, promoting competition, enhancing the rule of law, and reducing red tape. Phasing out import-substitution policies would make exports more competitive and help diversify the economy. Reducing directed cheap credit and reflecting the underlying risks in the bank lending terms would steer financial resources to the most productive use. Improving the education and health systems is also key, to nurture talent and skills needed to complement infrastructure investment.

“Better policy frameworks, including for management of public finances, debt, and investment, would improve policy effectiveness. Prudential regulation and supervision of banks should be strengthened and aligned with international standards to preserve financial stability and integrity. Improving governance further would reduce corruption risks as well as improve business and investment climate. In this context, Turkmenistan’s participation in the World Bank’s cross-country project on Doing Business indicators would be useful. Improving access to internet and increasing the use of digital technologies is also important.

“Further improvements in the availability, quality, and reliability of the economic statistics produced by official institutions and greater transparency in data and government regulations are crucial to encourage private investment and improve access to financing alongside supporting decision-making and credibility.

“The IMF team is grateful to the authorities and other stakeholders for their warm hospitality and insightful discussions. The next staff visit is tentatively scheduled for October 2019.”

Turkmenistan: Selected Economic and Financial Indicators, 2015–19

Est.

Est.

Est.

Est.

Proj.

2015

2016

2017

2018

2019

Output and prices

Real GDP

6.5

6.2

6.5

6.2

6.3

Real hydrocarbon GDP

0.1

-4.8

1.7

5.4

6.6

Real nonhydrocarbon GDP

9.4

11.4

7.2

6.3

6.3

Consumer prices (end of period)

6.0

6.2

10.4

7.2

9.0

Consumer prices (period average)

7.4

3.6

8.0

13.2

13.4

Investment and savings

Gross investment

47.3

47.0

40.8

28.2

29.2

Of which: State budget

6.6

2.8

6.0

1.5

1.9

Gross savings

31.7

26.8

30.5

33.9

28.8

Fiscal sector

Overall fiscal balance 1/

-0.7

-2.4

-2.8

-0.2

-0.2

Revenue

16.6

11.7

14.9

13.5

13.0

Expenditure

17.3

14.1

17.8

13.7

13.3

Domestic government debt

1.0

3.7

3.7

3.2

Total public debt 2/

21.8

24.1

28.8

29.1

30.4

Monetary sector

Credit to the economy 3/

27.4

27.7

14.7

11.4

17.0

Credit to GDP ratio

45.5

55.9

62.5

64.8

66.4

Broad money, incl. foreign currency deposits at CBT

16.1

9.4

11.4

8.4

8.6

Real effective exchange rate

0.6

8.8

5.0

7.4

…

External sector

Exports of goods (In millions of US$)

12,164

7,520

7,788

9,239

9,670

Imports of goods (In millions of US$)

14,051

13,177

10,189

5,094

7,397

Current account balance

-15.6

-20.2

-10.3

5.7

-0.4

Foreign direct investment

8.6

5.4

4.0

3.7

3.3

Total public sector external debt

21.8

23.1

25.1

25.4

27.2

Memorandum items:

Nominal GDP (in millions of manat)

125,299

126,630

132,742

142,664

162,836

Nominal GDP (in millions of US$)

35,800

36,180

37,926

40,761

46,524

Sources: Turkmen authorities; and Fund staff estimates and projections.

1/ Excludes government bond issuance.

2/ Includes domestic government debt and external public debt.

3/ Including credit to the government through purchase of government securities.


IMF Communications Department
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PRESS OFFICER: Randa Elnagar

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