Economy of Turkmenistan

Economy of Turkmenistan

Turkmenistan is largely desert country with nomadic cattle raising, intensive agriculture in irrigated oases, and huge gas and oil resources. One-half of its irrigated land is planted in cotton, placing the country in the top 10-15 producers [] . It also possesses the world's fifth largest reserves of natural gas and substantial oil resources. Until the end of 1993, Turkmenistan had experienced less economic disruption than other former Soviet states because its economy received a boost from higher prices for oil and gas and a sharp increase in hard currency earnings. As in the Soviet era, central planning and state control pervade the system, and the Niyazov government (in power 1991–2006) consistently rejected market reform programs. The state subsidizes a wide variety of commodities and services.

Fiscal Policy

The budget making process and its implementation goes according to the Law “On Budget System”. The law fixes legal foundations of organizing management and operating budget system, regulates interrelations between budgets of all levels. The Government of Turkmenistan discusses the State budget draft and submits it tothe President of Turkmenistan. Prior to one month of the beginning of the financial year the President of Turkmenistan submits to the Medjlis of Turkmenistan (Parliament) the State budget draft for consideration and adoptionBudget statistics are unreliable because the government spends large amounts of extra-budgetary funds. In 2004 official expenditures totaled US$3.05 billion, and revenues totaled US$3.05 billion, creating a balanced budget. The government also reported a roughly balanced budget for 2005, at an undisclosed level of revenue and expenditure. In an effort to increase revenues, the tax code was streamlined in 2004.

Monetary policy


Since 1991 – the last year of existence of the USSR – up to 1993 – the last year of rouble zone existence – the rate of inflation was measured in tens, hundreds and even thousands per cent per year. However the price growth continued and by November 1996 the total price level in Turkmenistan had increased tens of thousands times in comparison with December 1991. Simultaneously with the price growth the currency (dollar) exchange rates dropped. First it was rouble rate (1991)and later on, with the launching of the national currency. The Turkmen national currency – manat – was launched on November 1, 1993. The official exchange rate was established as $1equal to 2 manats.

In 1993 – 1995 Turkmenistan increased monetary base by 20 - 28% monthly; thus prices reacted by a monthly growth of 25 – 43%.The cash growth in circulation in 1993 – 1995 constituted 47.8%. The issue of cash increased 3 times and made up 7 billion manats. For the recent years the process of involving internal sources of investment into the sphere of currency turnover and currency accrual has become unprecedented in its scale. The tendency of the growth of this process and its significance require special study. It is worth noting thatthe major factors accounting for the quality of monetary policy are: rate of monetary base growth, rates of changes of velocity of money and rates of real GDP growth. Transition from a soft to a tougher monetary policy in the middle of 1996 immediately affected the dynamics of prices. In the world economy one of the most important sources ofmaintaining high rates of monetary base increase (though not the only one) is monetization of a budget deficit – its financing at the cost of issuing money instruments.


In the post-Soviet era, Turkmenistan’s industrial sector has been dominated increasingly by the fuel and cotton processing industries to the detriment of light industry. Between 1991 and 2004, some 14 new cotton-processing plants were opened, sharply increasing the capability of processing domestically produced cotton. The construction industry depends mainly on government building projects because construction of private housing is a low priority.


Turkmenistan's major gas deposits were discovered in its central and eastern areas in the 1940s and '50s, and in the 1980s the republic became the second largest producer of gas in the Soviet Union, behind the Russian SFSR. During the Soviet era gas was exported mainly to other Soviet republics, as Turkmenistan steadily increased delivery from about 9.2 million m³ in 1940 to about 234 million m³ in 1960 and about 51 billion m³ in 1975. This export was under centralised control, and most of the export revenue was absorbed into the Soviet central budget.Abazov, Rafis. "Historical Dictionary of Turkmenistan", p. 64-5. Scarecrow Press, 2005, ISBN 0810853620.]

This changed in 1991, when Turkmenistan gained independence and established full control over gas export and export revenues. However, Soviet-era pipelines dictate that much of the gas goes to the Caucasus, Russia and Ukraine. In the 1990s many of Turkmenistan's gas customers in the CIS failed to pay on time or negotiated barter deals. In the mid-1990s Turkmenistan stopped delivering gas to some CIS members, citing failure to pay and unprofitable barter deals. At the same time, the government tried to attract investments in building gas pipelines via Iran to Turkey and Western Europe via Afghanistan to Pakistan. Neither deal went through due to an unfavourable regional security environment and high costs; inflation and the budget deficit rose but privatisation was resisted. In the late 1990s the government renegotiated its export and price arrangements with Gazprom and renewed deliveries to Georgia, Ukraine, and some other countries. It also opened its first pipeline not to pass through Russia, the Korpezhe-Kurt Kui Pipeline.

Official estimates indicate that Turkmenistan is still the second largest gas producer in the CIS, after Russia, and a 2004 official estimate places reserves at about 23 trillion m³. Government statistics projected extraction of 75.4 billion m³ of gas in 2004, and 120 billion m³ in 2010.



The financial system is under full state control. The banking system, which was reduced substantially after the 1998 financial crisis, includes 12 national banks. These institutions have the same basic division of responsibility as in the Soviet era, overseen by the Central Bank of Turkmenistan. Lending operations and household savings have not been important functions of this system. In 2005 an estimated 95 percent of loans went to state enterprises. Turkmengosstrakh, the state insurance firm, has a complete monopoly of the very small insurance industry.


In the early 2000s, the contribution of Turkmenistan’s state-run agriculture sector to gross domestic product increased under close state supervision. As during the Soviet era, cotton is the dominant agricultural commodity because it is an export staple. However, in recent years state policy makers have increased the range of crops with the aim of making Turkmenistan self-sufficient in food. In the post-Soviet era, the area planted to grains (mainly wheat) has nearly tripled. However, most agricultural land is of poor quality and requires irrigation. Turkmenistan’s irrigation infrastructure and water-use policies have not responded efficiently to this need. Irrigation now depends mainly on the decrepit Garagum Canal, which carries water across Turkmenistan from the Amu Darya. The Dostluk dam, opened at Serakhs on the Iranian border in 2005, has increased available irrigation water and improved efficiency. Plans call for a similar dam on the Etrek River west of Ashgabat. Private farmers grow most of Turkmenistan’s fruits and vegetables (chiefly tomatoes, watermelons, grapes, and onions), but all production phases of the main cash crops—grain and cotton—remain under state control. In 2006 grain crop failures led to steadily increasing bread lines and reinstatement of a ration system in most regions. At the root of those failures was a culture of falsifying output figures together with poor administration of the sector

External trade

The Turkmen Government claims to have placed great emphasis on foreign economic relations and foreign trade and an "open door" trade policy, as declared by the PresidentFact|date=February 2007. At present 73 countries are partners of Turkmenistan, including the republics of the NIS. The most prominent trade partners of Turkmenistan are the United States, Turkey, Switzerland, Hong Kong, Germany, the United Kingdom, Cyprus, Iran, and the United Arab Emirates. Turkmenistan is a member of the Economic Cooperation Organization (ECO).

Export of industrial and agricultural raw materials remain the most important goals of the Turkmen Government. Price controls on most goods, the stabilization of reproduction processes, the creation of stable economic growth, and flexibility to innovations and a socially oriented economy also are very important. The government is attempting to strengthen state regulation of foreign trade and create a state system of insurance to expand and consolidate foreign economic relations. Because of considerable growth of foreign investments, improvements are taking place in the economy. Privatization of medium and large enterprises are proceeding slowly.

In January 2006, Saparmurat Niyazov ordered to stop paying pensions to ⅓ (more than 100,000) of elderly people, cutting pensions to another 200,000, and ordering to pay the pensions received in the past two years back to the State. This has resulted in a huge number of deaths of old people, who may have had their pension (ranging from $10 to $90) as the only source of money. []


Recent statistics are not available on Turkmenistan’s labor force. In 2003 the labor force was estimated to include more than 2.3 million workers, 48 percent of whom worked in agriculture, 38 percent in services, and 14 percent in industry and construction. Because the state dominates the economy, an estimated 90 percent of workers are in effect state employees. Unemployment statistics are not available because unemployment does not exist officially. It is believed that downsizing the government workforce, which began in 2003, increased unemployment in subsequent years.Fact|date=March 2008

Average wages in 2007 hover around $2-3 per day.


By 1999, privatization in trade, catering, consumer services was fully completed. Availability of adequate legal base, opening of credit lines, including the foreign ones, simplified the procedure of private enterprises opening and licensing, led to enlarge-ment of the sphere of entrepreneurship. The private sector dominates in agriculture (60%), trade (70%) and transport (56%).

Other statistics

Household income or consumption by percentage share:
*"lowest 10%:" 2.6%
*"highest 10%:" 31.7% (1998)

Industrial production growth rate:official government estimate: 22% (2003 est.)

*"production:" 11.41 TWh (2004 est.)
*"consumption:" 8.847 TWh (2002)
*"exports:" 1.136 TWh (2004)
*"imports:" 0 kWh (2002)

Electricity - production by source:
*"fossil fuel:" 99.9%
*"hydro:" 0.1%
*"nuclear:" 0%
*"other:" 0% (2001)

Agriculture - products:cotton, grain; livestock

Debt - external:$2.4 billion to $5 billion (2001 est.)

Exchange rates:Turkmen manats per US$1 - 5,200 (January 2000), 5,350 (January 1999), 4,070 (January 1997), 2,400 (January 1996)

"in recent years the unofficial rate has hovered around 24,000 to 25,000 Turkmen manats to the dollar. The official rate has consistently been 5,200 Manat to the dollar."


External links

* [ Turkmenistan: Potential 'Super-Giant' Emerges On Energy Scene]

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