Turkmenistan

Turkmenistan had a difficult and far from complete transition from central planning, affected by the disruptions of the end of the USSR but introducing its own currency. It then had a decade of heavy direct controls and directed lending by the central bank before fixing the exchange rate to the USD as a nominal anchor and moving in a limited way towards market mechanisms. However, credit growth to the private sector remained very low, financial market development insignificant, and direct controls pervasive.

Years Targets and attainment Classification
1992-95 independence (out of USSR) late 1991, moves towards market economy but commitment to continued major role for state; local branches of USSR central and state banks turned into local banks; central bank initially lacking in expertise and institutional capacity, but mid-1993 reforms to legal status, reserve requirements and refinancing practices, plus start of weekly credit auctions; membership of ruble area means country affected by price liberalisation and disruptions to monetary and payments arrangements originating in Russia; late 1993 new national currency introduced, with forced bond conversion whose proceeds are not well used; more changes to refinancing and reserve requirements, credit auction volumes low and discontinued late 1994, poor bank compliance with regulations, central bank lending to SOEs directed by political authorities, administrative measures to reduce interest rates; 1993-5 lack of access to regional gas pipelines affecting sales of gas to Europe and rising arrears owed on gas purchases by FSU countries lead to direct controls being strengthened and provide excuse for lack of progress on structural reforms; exchange rate (supposedly set in weekly forex auctions) heavily managed with frequent devaluations, import compression measures, parallel market with low volume but high premium unstructured discretion UD
1996-2007 major reforms announced end-1995, including emphasis on monetary stabilisation carried out by more autonomous central bank; start-1996 (previously multiple) exchange rates unified with large devaluation, reserve requirements unified, credits directed by presidential decree suspended, moves towards market-determined interest rates, banking supervision improved; from mid-1996 forex auctions, but heavily controlled, and commercial bank rate diverges from official; complications from operations of Foreign Exchange Reserve Fund; late 1996 wages doubled by decree and directed credits resumed at large scale, but central bank sold more foreign exchange 1997, stabilising exchange rate, and reduced frequency of credit auctions to control liquidity; main monetary instrument is now forex sales, with reserve requirements not often changed and treasury bills, issued on tap  by government, playing no monetary role; 1997 rising arrears lead to recurring suspensions of gas exports to Ukraine; exchange rates re-unified April 1998 with devaluation; Russian crisis August 1998; commercial bank forex market closed end-1998; rise of extrabudgetary funding, continued directed credits, forex rationing; 1998-9 bank restructuring strengthens government control, central bank financing of budget deficits (automatic, via overdrafts) increases, growing parallel market premium and rising external debt, little progress on structural reform; from 1999 with resumed gas exports to Russia and Ukraine, high hydrocarbon-driven growth (even on sceptical IMF estimates) brings major economic recovery, with falling inflation, but state retains dominant role in economy, economic (and political) controls are tightened, and macro policies remain inconsistent; quasi-fiscal activities and extrabudgetary funds preclude fiscal transparency; official exchange rate pegged to USD but massive spread (> 400%) in parallel market; 2005 IMF still not convinced by high growth rates reported by Turkmen government, authorities continue to insist on state-driven, control-heavy, economic strategy loosely structured discretion LSD
2008-17 policy changes under more outward-looking government from 2007 including exchange rate unification and reorganisation of forex market over first four months of 2008, with currency then pegged to USD at rate closer to preceding parallel market rate (whose premium largely disappears), plus plans to limit directed credits and reform banking sector; 2009 currency redenomination (1 new manat = 5000 old), banking sector reforms, but directed lending (sterilised by forex sales) continues; limited effects from GFC; some movement away from state-dominated to more market economy, but very slow, e.g. economy remains financially closed with banks largely state-owned and lending mainly to SOEs; new state development bank 2011 takes over some directed lending from central bank, but authorities resist IMF pressure to eliminate this practice, or to allow greater exchange rate flexibility (which would require major prior developments in monetary policy and financial markets); start-2015 fall in energy prices and Russian slowdown lead to large devaluation; heavy controls on forex transactions remain;  some improvement in collection and production of statistical data over period, but data mostly not published augmented exchange rate fix AERF

Selected IMF references: [note BPSA 1993 not available] SR 1993 pp7, 11-13, 17-19; BPSA 1995 pp1-2, 28-9, 32-4, 37, 40, 42, 47-9; SR 1995 pp3, 5, 8-9; RED 1996 pp1, 20, 24-7, 35-6; SR 1996 pp5-6, 14-16; RED 1997 pp32-6, 38-41, 53-6, 92-6; RED 1998 pp6, 42-5, 51, 57-8; RED 1999 pp7-8, 33-4, 37-8, 40; SR 1999 pp4-10; [Note no Article IV reports 2000-03 because of data inadequacy and political events] SR 2004 pp5-19, 35; SR 2005 pp7-13, 16-18; SR 2007 p8; SR 2008 pp8-9, 12-13, 14-15; SR 2009 pp4, 8-10; SR 2010 pp10-11; SR 2011 pp8-10; SR 2013 pp10-13, 15; SR 2015 pp15-16, 23; SR 2018 pp6, 16-17, 18, 22.