Turkmenistan Faces Economic Crisis

An economic crisis that has been quietly creeping closer to Turkmenistan suddenly came to the forefront this month. EurasiaNet reports mass grocery shortages across the country, including the capital city of Ashgabat, with commodities like sugar and cooking oil. Radio Free Europe reports mass layoffs and an unemployment rate nearing 50 percent. The government, already delaying wages for state workers for months, began arbitrarily removing money from workers’ paychecks, calling it a “voluntary donation.” Black market exchange rates for Turkmenistan's currency, the manat, have plummeted over the last year to as little as 7.4 manats to the dollar, despite government attempts to enforce a strict official exchange rate of 3.5 manats per dollar. So what went wrong in the country once described as the “biggest winner” of the former Soviet Union? Dr. Luca Anceschi, Professor of Central Asian Studies at the University of Glasgow, blames Turkmenistan’s leadership. He states that the country’s first president, Saparmurat Niyazov, started off well by using gas exports to guarantee basic services like water and electricity while pushing a rhetoric to make Turkmenistan “a second Kuwait,” but later devolved into a bizarre form of personal rule that included renaming the days and months and making his own book Rukhnama the “mandatory spiritual guidebook for the nation.” His successor, Gurbanguly Berdymukhammedov, reserved some of Niyazov’s more extreme reforms but focused too much on exporting gas following the creation of a pipeline to China in 2011.

Herein lies the cause of Turkmenistan’s economic worries. Since 2011, gas prices have fallen by 50 percent, and Russia’s sudden refusal to stop purchasing Turkmen gas this year has only worsened the situation. However, market forces are not the only thing hurting Turkmenistan. Just this June, a multimillion dollar embezzlement scandal broke at Turkmennebit, the state oil company. Excessive spending by the national government is also to blame. In September, the government opened the brand-new $2.3 billion Ashgabat airport. The airport is built to handle 17 million passengers a year, even though only around 100,000 people visit Turkmenistan each year. Similar exorbitant spending can be seen in the $5 billion “Olympic Village” Turkmenistan is building for the Asian Indoor and Martial Arts Games. The Turkmen government is still spending as if commodity prices never fell, and if it does not change its mindset, it could risk bankruptcy.

But all is not lost in Turkmenistan. On November 3, the World Bank Vice-President of Europe and Central Asia Cyril Muller announced that Turkmenistan had joined the ranks of upper middle income countries. Furthermore, despite its economic troubles, the World Bank estimates that Turkmenistan’s annual GDP growth rate through 2018 will be a staggering 5 percent, which, while a decline from the 9.1% growth Turkmenistan experienced in the first half of 2015, is still far larger than any developed country. Finally, Deputy Prime Minister Yashgeldy Kakaev, who is considered far more open than his successors, recently gained responsibility over Turkmenistan’s oil and gas policy.  Hopefully, with these new developments, Turkmenistan will be able to utilize its extensive natural resources to escape from its current crisis.