Press Release No. 16/544

IMF Staff Concludes Visit to Turkmenistan

December 6, 2016

• Turkmenistan continues to be impacted by an adverse external environment, similarly as the other Central Asian countries.
• The expectations for persistently lower oil and natural gas prices imply the need for additional policy adjustment.
• 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.

An International Monetary Fund (IMF) mission led by Mr. Martin Sommer visited Ashgabat during December 1–6, 2016, to assess macroeconomic and financial developments and discuss economic challenges and policy priorities with senior government officials and the diplomatic community. At the end of the mission, Mr. Sommer issued the following statement:

“Turkmenistan continues to be impacted by an adverse external environment, similarly as the other Central Asian countries. 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, although domestic non-hydrocarbon growth has been supported by credit and structural policies in support of diversification.

“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 state budget is projected to record a small and better-than-planned deficit this year.

“The Turkmen authorities have taken a number of pro-active measures to address these challenges. They devalued the manat in January 2015, cut investment spending and subsidies, and re-doubled their efforts to boost local production, both through new strategic investments in the hydrocarbon sector, as well as by providing cheap and ample financing to the local businesses.

“The expectations for persistently lower oil and natural gas prices imply the need for additional policy adjustment. Priority areas include further efforts to reduce the external deficits through a combination of policies that lower aggregate demand. There is also scope for continued progress in increasing the efficiency of public spending, further improvements in banking regulation and supervision to prevent the build-up of risks, and additional steps to move to a more market-based real economy and financial sector. The authorities’ intention to accelerate development of the private sector is appropriate and should be based on market-based principles as much as possible, so as to support growth and living standards in a sustainable manner.

“In the current environment of multiple policy challenges from the external environment 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. These communication enhancements should also include a more frequent and detailed publication of the macroeconomic and financial data to the public.

“The IMF stands ready to support the government’s reforms through policy advice and capacity building, including on macroeconomic statistics and forecasting, monetary policy operations, and fiscal policy.

“During the visit, the team also discussed key themes for the 2017 Article IV Consultation mission, which is scheduled to take place in March next year. The team would like to thank the authorities for their generous hospitality and constructive discussions.”