‘Turkmenistan is doing well’
If you were to go by official figures released by Turkmenistan, the economy is doing quite well. The country grew by an enviable 6.2% in 2016. According to the country’s Ministry of Economy and Development, all sectors including industrials, construction, agriculture and others, witnessed growth in the year with trade surging by 14.1%.
However, the International Monetary Fund (IMF) is not quite convinced about the veracity of macroeconomic data. A recent communication from the agency noted that “Broader dissemination and improving the 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.”
Even if we were not to question the authenticity of economic figures, it is unlikely the people of Turkmenistan would claim to benefit from the stated economic growth as they don’t have anything tangible to show for the claimed performance either.
Going cash free: By choice or force?
Turkmenistan is modernizing its economy by going cash free. However, as Eurasianet.org noted, “all available evidence points to the move being motivated by a stubborn liquidity crisis that shows no sign of abating.”
In order to increase the use of cards, the government reduced the commission on cash withdrawals by cards by half to 0.5% from January 2017 and does not charge any commission for transactions routed via payment terminals.
The government also put a stop to exchanging foreign currency in cash in 2016. According to Eurasianet.org, “Rather than getting cash in hand, account holders are now meant to convert their manat incomes into a foreign denomination in-country at their bank and then transfer it with their cards.” Manat is the national currency of Turkmenistan.
On a topical level, this appears to be a positive step to go cash free, but it is beyond this step that the problems start.
Though one can convert foreign denominations into local currency, it is quite difficult for people to convert that into real cash. This is due to restrictions placed on cash withdrawals ranging from 100 to 1,000 manat a day in different cities, including the capital Ashgabat. This is negatively impacting both individuals and businesses and can hurt domestic consumption.
And regardless of the claims by the government about the country’s economic health, the graph above shows that it has slowed down considerably.
But beyond cash restrictions, there’s another important factor which has hurt the country’s economic growth. Let’s look at that in the next article.