IMF advises Turkmenistan to continue reducing government spending
Following the visit, the delegation published a press release with recommendations for the government.
A representatives of the IMF stated that the economy of Turkmenistan is gradually adapting to the existence of lower prices for oil and natural gas. However, they noted that it needs to implement further measures for "macro-economic adjustment."
"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 report says. At the same time, the authors noted that the negative effect of these measures on economic growth and the vulnerable segments of the population should be mitigated.
The authors of the report also advised simplifying administrative regulations, speeding up reform and privatisation of state-owned enterprises. They noted that the Turkmen authorities have already adopted a number of measures that promote "macro-economic adjustment," including a reduction in public investment and "utility price reform."
Turkmenistan was among the states whose economies suffered from a drop in energy prices. According to the World Bank, the hydrocarbon sector accounts for half of the gross domestic product (GDP), more than 90 per cent of exports and more than 80 per cent of the country's budget revenues. The economy of Turkmenistan has maintained growth even with cheaper energy resources, although it declined from 10.3 per cent in 2014 to 6.2 per cent in 2016. According to the IMF report, it is provided by increasing volumes of gas exports and import substitution.
At the same time, the country lives with a scarce budget. The budget for 2017 was adopted with a deficit of 1 per cent (in 2016—more than 2 per cent), about 1.3 billion manat ($371.4 million). Significantly, as noted in the IMF report, it remains the current account deficit.
According to the Asian Development Bank, in 2017, it accounted for 12.8 per cent of the GDP.
In early 2015, Turkmen President Gurbanguly Berdymuhamedov acknowledged the existence of an economic crisis, stating the need to cut spending. A reduction in the number of employees and a reduction in salaries in the oil and gas sector of the country also took place after that.
Later, the authorities announced a reduction in the cost of imports of agricultural products. In 2016, there were reports of delays in the wages paid to state employees and a shortage of food. Informal sources claimed that the government asked the heads of regional administrations to save more by cutting staff, and "to replenish the budget by fining individuals and legal entities for whatever reason."
Recently, President Berdymuhamedov announced the cancellation of the remaining privileges—quotas for free electricity, gas, and water. These benefits, along with previously cancelled free gasoline, were introduced under the late president Saparmurat Niyazov.
Announcing their cancellation, Berdymuhamedov said there is no need for them—allegedly due to an improvement in the economic situation and an increase in the population's incomes.