Turkmenistan adjusting to new reality of lower oil and gas prices, IMF says

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ASHGABAT (TCA) — An International Monetary Fund (IMF) mission led by Mr. Martin Sommer visited Turkmenistan during November 1-8 to assess macroeconomic and financial developments and discuss economic challenges and policy priorities with senior government officials, representatives of real and financial sectors, academics, and the diplomatic community.

“The Turkmen economy continues to adjust to the new reality of lower oil and natural gas prices. Officially-reported growth has remained broadly stable, boosted by rising natural gas exports, import substitution, and expansionary credit policies. The planned launch of gas-processing facilities will support economic activity going forward,” Mr. Sommer said in a statement at the end of the mission.

“The authorities have taken a number of measures to facilitate macroeconomic adjustment, most recently through a gradual reduction in public investment and utility price reform. Since the current account deficit remains significant despite its narrowing this year, the key near-term policy challenge remains re-calibration of the policy mix to reduce external imbalances. Desirable policies include further gradual but significant cuts in public investment expenditures, combined with measures to adjust the exchange rate level, while easing foreign exchange regulations. The pace and composition of policy adjustment should be designed to reduce the undesirable impact on economic growth and vulnerable segments of the population.

“To foster further private sector development, reforms should focus on significantly simplifying administrative procedures and onerous regulations, accelerating SOE reforms and privatization, and prioritizing accumulation of human—rather than physical—capital. The recently-announced policy package including the seven-year economic and social development plan presents an opportunity to broaden and deepen market-oriented reforms to foster sustainable and inclusive growth over the longer term. The simplified framework for the free economic zones holds the promise of attracting new private investments, including from abroad, and any positive lessons should be applied across Turkmenistan more broadly.

“The authorities are preparing other structural reforms such as medium-term budgeting, transition to GFSM2001 fiscal data reporting, and a financial regulatory overhaul which would introduce elements of Basel principles into local regulations. These reforms should be implemented as soon as feasible. In addition, broader dissemination and improving quality of macroeconomic and financial data would help enhance understanding of economic trends, attract foreign direct investment, and ease access to the global financial markets,” the statement said.

Sergey Kwan

TCA