A team of International Monetary Fund specialists have concluded their latest visit to Turkmenistan and returned with some sobering observations on the state of the energy-dependent nation’s economy.
One key takeaway from a statement issued on December 6 is that the government will have to adopt greater measures to compensate for the expected persistence of low prices for oil and gas.
“Hydrocarbon prices remain low and trading partner growth is muted. As a result of these external factors, Turkmenistan’s overall economic growth has slowed down,” the IMF mission said in a post-visit statement.
These confluence of developments means that Turkmenistan is spending beyond its means, and that this trend is worsening.
“The current account deficit is expected to widen significantly in 2016 as a result of lower energy revenues, and in spite of an active policy effort to substitute imports with domestic production, promote exports, and reduce public investment expenditures,” the IMF mission said.
President Gurbanguly Berdymukhamedov has advanced import substitution as a cure-all panacea to his country’s troubles. Not that any officials have admitted there is anything wrong with the economy, which may be part of the problem, as the IMF mission implies.
“Amid multiple external policy challenges and a number of domestic reforms, stepped-up communication efforts to explain policy plans, their benefits as well as the possible side effects, would be helpful,” the fund delegation said.
Areas for improvement highlighted by the IMF mission included “increasing the efficiency of public spending,” improvement to banking regulations and taking more steps toward creating a more market-based economy and financial sector.
A draft presidential decree in Uzbekistan posted on a government portal on November 28 has laid out plans to liberalize the currency market, an apparent fresh step in acting President Shavkat Mirziyoyev’s mission to improve investment conditions and kick-start the moribund economy.
The draft has been posted online and internet users are being invited to offer suggestions and modifications before December 14.
In its current form, the decree proposes major financial reforms to “further liberalize and improve monetary policy, develop and increase the efficiency of the domestic foreign exchange market and improve conditions for the foreign transactions of enterprises.”
The US Department of Commerce details the plight endured by companies forced to navigate Uzbekistan’s onerous foreign currency rules.
“All legal entities, including those with foreign investments, must receive special permission from the Central Bank to access foreign currency. Officially, it is a routine procedure, but in reality an applicant must go through many layers of bureaucracy, which entails extensive time and effort. Moreover, the government regularly issues classified instructions telling banks which transactions requiring currency exchange are allowed, and which are not,” the website export.gov explains.
The government says it will level the playing field for companies operating in foreign currency and halt the practice of providing loans and preferential conditions to some companies over others.
Authorities also propose to allow the exchange rate to float in line with market mechanisms, while preventing legislation that could negatively affect the stability of the national currency, the Uzbek sum.
Uzbekistan’s state-run Channel One aired a sensational segment during a show called Business Club on November 5 that featured the frustrated observations of an indignant entrepreneur.
In a unusual televised outburst, Olim Sulaimanov explained how employees with a branch of the anti-finance crime department of the Prosecutor General’s Office in Tashkent had tried to extort money from him. Sulaimanov named names and figures in his description of how tax officials have been targeting his company.
“An employee with the department, Dilshod Hazratkulov, intimidates businessmen with money on their [bank] account and extorts money from them,” Sulaimanov said.
In Sulaimanov’s telling, Hazratkulov dropped in on his office in April and demanded that he transfer 48 million sum (around $7,500 at the current black market rate) onto the account of some other unknown company. The businessman said that when he refused, he had his assets frozen. Sulaimanov said that as a result he lost a $1 million contract to deliver fruit and vegetables to Russia.
The appearance on Business Club came about after Sulaimanov posted a video on YouTube directly appealing to acting president Shavkat Mirziyoyev for assistance. In the video, Sulaimanov asks that he be allowed to make his case during a television broadcast.
Sulaimanov, 61, founded and runs a company called Atlant Business Optima, which has been in operation since 2011 and deals primarily in exporting fruit and vegetables.
Now, whether this sequence of events is for real or otherwise is up for debate -- it is always possible it was a bit of theater for the viewers -- but what is clear is that Mirziyoyev is endeavoring to demonstrate that the rules of the game have changed for Uzbekistan’s long-suffering business community.
Intriguing figures on China’s natural gas purchases reported by Russian state news agency TASS and relayed by website Eurasia Daily has shed some light on Turkmenistan’s current economic woes.
In the first nine months of 2016, China reportedly increased its overall imports of gas by 26.5 percent on the previous year, up to 71.6 billion cubic meters. The average price it paid for the fuel was $228 per 1,000 cubic meters, according to data reportedly collated by China’s General Administration of Customs. That was apparently $100 less than Beijing was paying last year.
The cheapest gas of all, however, is coming from Turkmenistan, which reportedly sells its exports to China at a giveaway rate of $185 per 1,000 cubic meters. Turkmenistan sold China 23 billion cubic meters of gas over the reported period, accounting for 13 percent of what Beijing imported.
Australia was a far second to Turkmenistan as a gas supplier — 11.6 billion cubic meters shipped to China in liquified form at $220 per 1,000 cubic meters.
The takeaway here is that Turkmenistan is being badly pinched on its only serious export commodity.
And as the Chronicles of Turkmenistan points out, Ashgabat’s sale of gas to China is serving primarily to service multibillion loans issued by Beijing.
This might explain Turkmenistan routine but lackluster attempts to restore diversity among its buyers.
In the long-term there is the trans-Afghan TAPI pipeline — the prospects of which are subject of much skeptical analysis.
Uzbekistan’s currency has taken a severe battering on the black market over the past week.
Back on October 22, unofficial currency traders in the capital, Tashkent, were buying dollars at around 6,400 sum. The rate as of the start of the week was just shy of 7,000 sum — although as a testament to the volatility of the currency, rates have been regaining their positions toward the end of each working day. By the close of business on October 25, the rate was 6,600 sum.
“Because of the spike in dollar rates, people have stopped selling their foreign currency and almost nobody buys it,” one black market trader called Bahrom told EurasiaNet.org. Bahrom said the sudden downward pressure on the sum was the result of the price increase for automobile gas announced by the authorities over the weekend.
Transactions in the gasoline market are largely carried out in dollars. State energy company Uzbekbeftegaz buys large amounts of fuel in Kazakhstan and Russia and pays for it in dollars. Private owners of gas stations in Uzbekistan also use the US currency to purchase their supplies.
The official exchange rate has also been registered some fluctuations, albeit only minute ones since the government is typically reluctant to admit to weaknesses in the economy. The rate last week was 3,065 sum to the dollar, but that has gone up to 3,084 sum.
Black market currency trader Rasul told EurasiaNet.org that he believes the street value of the sum could possibly break through the 7,000 psychological barrier by the end of the year, which would result in a fresh round of price increases for groceries. Other traders remain confident the sum could stay around the 6,700 figure, however.
Uzbekistan’s national energy company has announced a sharp increase in prices for car gasoline while offering assurances it will camp down on the speculation that has made the real cost of buying fuel even greater.
In what it cast as a response to public dissatisfaction over the situation with gasoline, Uzbekneftegaz on October 22 announced that as of this week the cost of most basic and popular type of gas — AI-80 — has been set at 2,800 sum ($0.90) per liter, up from 2,075 sum.
The price for higher grade AI-91/92/93 fuels has been set at around 3,000 sum and the highest available grade, AI-95, will sell at 3,300 sum per liter.
Those prices are only a fantasy for many Uzbek motorists gouged by middlemen, many of whom obtain fuel from the capital, Tashkent, and sell it in the provinces at between 3,000 and 5,000 sum per liter. Uzbekneftegaz said it is ensuring all gas stations stick to the officially decreed prices.
Even before the price rise was announced, Tashkent had already recorded notable shortages in fuel at gas stations. The sight of large numbers of motorists lining up a fuel retailers in the hope of getting some gas is recurrent feature of this time of year. Gas stations sell fuel until around 11 o’clock in the morning and then close their doors until the next day.
Fuel shortages typically occur in Uzbekistan around the start of December, but the deficits are being seen earlier this year. Uzbekneftegaz is allocated money annually by the government to import fuel, but the amount purchased is never enough to get through to the end of the year.
Turkmenistan is looking down the barrel of its worst economic crisis in years and the effects are being felt starkly on the street.
In the most radical development to date, shoppers in the capital, Ashgabat, have started reporting a lack in availability of staple groceries like sugar and cooking oil.
In some stores, sugar is missing altogether, while others are selling the commodity only in rationed amounts of 1 kilogram per buyer. Shoppers arrive at stores early in the morning and get in lines in the hope that they can get their hands on a bag. Only once they ascertain there is no sugar to be bought do they disperse.
The cheapest cottonseed oil on the market, produced by the Ahal factory, is being rationed to one or two bottles per buyer.
Smokers have it the worst. Back in January, multiple media outlets reported that Turkmenistan had slapped a ban on the sale of cigarettes. That was a slight misrepresentation of the facts, but it is most certainly true the cost of the smoking has soared and the availability of cigarettes shrunken drastically. And things continue to get worse for the cigarette-dependent. Residents of Ashgabat have reported seeing lines of many dozens of people outside stores selling tobacco.
Prices for almost all groceries are rising, and rising daily.
The unofficial exchange rate is also seeing some radical movement and reached a historic high in recent days. The official manat rate is 3.5 against the US dollar, but the currency is trading on the street for anywhere as much as 7 manat to the dollar. RFE/RL’s Turkmen service, Azatlyk, has cited people inside the country as saying they have seen rates of up to 7.4 manat to the dollar.
Mortgage holders picket a bank in Almaty, Kazakhstan, in a demand for their loans to be refinanced following the dramatic fall in value of the national currency, the tenge.
In a reprisal of impromptu rallies seen earlier this year, around 30 mortgage holders in Kazakhstan’s business capital picketed banks on September 19 demanding their loans be refinanced.
Frustration is mounting among many debtors that a program ordered by President Nursultan Nazarbayev for the central bank to provide commercial lenders with 130 billion tenge ($380 million) to refinance loans is failing to take full effect.
The rallying mortgage holders, who complained that their debts had not been refinanced, called during their picket for them to be granted 1 percent interest rates and five-year repayment periods.
But Zhanna Sadykova, a member of the Let's Leave Housing for the People, claimed in remarks to EurasiaNet.org that banks are refusing to grant those terms.
Those suffering the most are people like 64-year old pensioner Tatyana Alenkina, who obtained a dollar mortgage worth $35,000 in 2008 to buy an apartment. She repaid $27,000, but a paltry monthly pension worth 35,000 tenge (devalued to $89 by the collapse of the national currency) means she can no longer keep up with payments.
“They kicked me out of my apartment in the evening, they won’t let me into my apartment any longer. I cannot find my things. I am going hungry. Now I’m living in a basement,” Alenkina told EurasiaNet.org.
The National Bank has said that as of September 1, almost 18,000 refinancing requests out of a total of more than 24,200 have been fulfilled. Protesters blamed banks for disruptions to the refinancing program.
Turkmenistan’s President Gurbanguly Berdymukhamedov has made a major stride toward being enshrined sultan-for-life after the country’s token lawmakers approved major changes to the constitution.
Parliament and the Council of Elders at a joint session on September 14 waved through an increase of presidential terms from five to seven years and agreed to scrap the 70-year age limit for pretenders to the highest office in the land.
These fixes ensure that Berdymukhamedov, 59, will be able to remain in situ for as long as he pleases.
Speaking at the Council of Elders assembly, a gathering of town seniors from all across the country, Berdymukhamedov claimed that the amendments had been adopted at the request of the people.
The new constitution was “drafted by all our people on the basis of multiple suggestions from the country’s citizens, political parties, representatives of civic associations, state bodies, scientific organizations, lawyers and international experts,” he said.
Signing off on the new constitution, Berdymukhamedov said the revised document would give the country a new thrust of energy.
Berdymukhamedov, a dentist by training, came to power in late 2006 following the sudden death of Saparmurat Niyazov, who granted himself lifelong leader status in 1999. He was reelected to a five-year term with 97 percent of the vote in 2012.
The next presidential elections will take place in 2017 and involve participation of three political parties — the Democratic Party, the Agrarian Party, and the Industrialists and Entrepreneurs Party. All those parties are transparently bogus entities clumsily designed to convey the notion of a plurality that barely anybody accepts at face value.
All the same, Berdymukhamedov opined that the spirit of competition between parties would create a fresh mood in the country.
Dariga Nazarbayeva, Kazakhstan’s deputy prime minister and the eldest daughter of the president, has supported a novel solution for using up cannabis crops growing wild in the countryside: turn them into paper.
Kazakhstan has long battled with its virulent wild cannabis crop, which grows freely in the Chui Valley — a much-beloved part of the region among avid aficionados of the weed. As Interior Minister Kalmukhanbet Kasymov explained, authorities are at a loss to police the huge areas covered by the plant.
“Of course, covering all 140,000 hectares (140 square kilometers) is not possible. Cannabis grows all over the country. So we have to decide what to do with it. Either destroy it or use it for economic development,” Kasymov said.
Deputy Investment and Development Minister Albert Rau said at a government meeting on August 8 that proposed methods for utilizing hemp would entail processing measures that destroy the active narcotic ingredient.
A statement on the government website notes somewhat redundantly that research has revealed that cannabis plants could be turned into a type of cellulose that lends itself to transformation into all kinds of paper: banknotes, wrapping paper and office paper. Even textiles and foodstuffs. This is nothing new to admirers of hemp. Indeed, as the North American Industrial Hemp Council notes, hemp has been used to produce paper and textiles for at least 12,000 years.
And as Nazarbayeva approvingly noted at the government meeting, the cost of the paper produced would be low.