Statement at the End of an IMF Mission to Turkmenistan

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.

An International Monetary Fund (IMF) mission led by Mr. Björn Rother visited Ashgabat from January 14-27, 2015 to conduct discussions for the 2015 Article IV consultation.1 At the conclusion of the mission, Mr. Rother issued the following statement:

“Turkmenistan has experienced impressive output growth over the past years, resulting in a doubling in per capita income since 2009. In 2014, GDP increased by 10.3 percent on the back of sizeable and growing hydrocarbon revenues and large public investment. In spite of price increases for utilities and transport services and strong non-hydrocarbon growth of 13 percent, inflation remained in the mid-single digits helped by declining international food prices and the high import content of fiscal spending.

“Saving parts of the hydrocarbon revenues led to the accumulation of a strong international reserves position, which in December 2014 stood at 22 months of import cover. This practice has helped to ensure macroeconomic stability and anchor expectations. If recent growth performance is broadly sustained into the future with strong macroeconomic and structural policies to encourage diversification and private sector activity, Turkmenistan can reach high-income status within the next decade and create productive jobs for its young population.

“Adverse changes in Turkmenistan’s external environment and downside risks define the near-term outlook. Among these are a further fall in oil prices and spillovers to natural gas prices, lower gas exports and declining investor and consumer confidence as a result of the economic slowdown in Russia, depreciation pressures on many currencies in the Central Asia region, and decelerating growth in China and its continued efforts to diversify gas supplies. As a result, macroeconomic prospects have been affected: taking into account also a modest slowdown in the growth rate of public investment, GDP growth could decline to 8.5 to 9 percent in 2015, and budget and external current account balances would deteriorate moderately before recovering over the medium term.

“Turkmenistan’s authorities are aware of recent adverse developments and risks. With large international reserves, Turkmenistan seems to be in a stronger position than many of its neighbors to cope with the challenges, such as uncertainty about energy prices. If needed, the country can use some of these financial reserves to support its budget expenditure and imports. At the same time, the authorities have demonstrated their readiness to take decisive action, as evidenced in January 2015 by the devaluation of the Manat together with measures to bring domestic gasoline prices closer to cost recovery.

“The near-term policy challenge is to take additional precautionary measures to manage the economy successfully through the less benign external environment. A modest improvement in the general government balance as a share of GDP is prudent and appropriate given capacity constraints in public investment and to preserve macroeconomic stability and limit inflationary pressures after the recent devaluation. Additional fiscal adjustment could be phased in over the medium term if energy revenues decline sharply. A significant reduction in directed lending over the next years, strengthening bank regulations on open foreign exchange positions, gradual transition toward more exchange rate flexibility in the longer term, and stepped-up communication to the public would also help. Together with steps to support competitiveness and protect the most vulnerable segments of society from negative effects of the January measures, this will help ensure economic stability, further reinforce credibility of macroeconomic policies, and limit the pass through of the devaluation and higher gasoline prices to the broader price level and wages. The mission expects inflation of 6 to 6.5 percent on an end-of-year basis (7 to 8 percent on average).

To sustain higher and more inclusive growth over the longer term, the authorities should build on progress and accelerate reforms to (i) strengthen governance and transparency, notably for managing hydrocarbon revenues; (ii) improve the quality of fiscal spending and transition to more market-based monetary and financial sectors; and (iii) remove obstacles to diversified and private sector-led growth, in cooperation with external partners.

“Ongoing efforts to improve outreach on macroeconomic issues as well as data quality and dissemination are encouraging and should pave the way for, inter alia, adhering to the IMF General Data Dissemination Standard and opening a country page inInternational Financial Statistics (

“The mission would like to underscore the excellent, cooperative relationship between Turkmenistan and the IMF, which has also resulted in increased capacity building assistance on central banking operations and statistics. During their visit, the IMF team met with senior central bank and government officials, and representatives of commercial banks, the private sector, and international institutions. The team also gave a presentation on the economic outlook to students at the Institute of Economy and Management.”

1 Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.