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Turkmenistan: Firing Of Top Banker Reveals Economic Problems

Boston, 27 September 1999 (RFE/RL) -- The firing of one of Turkmenistan's top banking officials has turned a spotlight on the problems of the country's finances and its economy.

The dismissal followed a surprise visit by President Saparmurat Niyazov to the country's central bank on September 17. The managers of Turkmenistan's Vneshekonombank for foreign trade and investment were also called in.

Yula Gurbanmuradov was sacked as Vneshekonombank's chairman, although he retained his post as deputy prime minister for investment. Nurgeldiev Amanmukhamed was named first deputy chairman, apparently to head Vneshekonombank, at least on a trial basis.

In explaining the shakeup, Niyazov blamed the bankers for a series of shortcomings, including inability to attract foreign investment and failure to pay foreign loans on time.

"Bank workers are unable to make a clear, firm and exact calculation of external debts and the amount owed by other countries to Turkmenistan,'' the president was quoted as saying. ``Turkmenistan must never play the role of debtor. The country has the resources to return borrowed money in the strict time period agreed and according to international legal norms."

He also charged that banking officials had provided faulty information to multilateral lenders. That allegation may be the most telling for a country that has suffered both from economic shocks and a near-total lack of transparency.

Reliable data on Turkmenistan has proved difficult or impossible to get. Unlike other nations in the region, the country regularly fails to report its economic performance to the CIS Statistics Committee. When the government does make figures public, they are almost invariably positive. Negative numbers are routinely withheld, although officials release them periodically during disputes with trading partners. The country's finances have been stretched to the breaking point for the past two years.

Reuters reported last week that Turkmenistan's foreign debt rose to $1.8 billion by the start of 1999 from $700 million two years before, while debt arrears mounted to $60 million. The figures are significant in light of the country's total gross domestic product, which the International Monetary Fund valued at just $2.4 billion last year.

Turkmenistan has struggled since its independence, but most especially since 1997, when a pipeline dispute with Russia virtually halted its gas exports, its major source of income. Deliveries through Russia to Ukraine were resumed briefly this year, but suspended again when Kyiv failed to pay. Turkmenistan says it is owed $665 million, but Ukraine only acknowledges $240 million in debt.

Ashgabat also hoped that the prospect of building a trans-Caspian gas pipeline would open the door to financing that would carry it through. But delays due to disagreements with Azerbaijan have stretched Turkmenistan's finances even thinner.

In the midst of its problems, the government continues to publicize economic figures that only tell a small part of the story. Last week, Turkmenistan reported that its industrial production rose 18 percent in the first eight months of the year from the comparable year-earlier period. The figures include a reported doubling in the output of gas, reflecting the deliveries to Ukraine, even though Turkmenistan was not paid. Following consultations with the government, the IMF also estimated this week that the country's GDP will rise 18.5 percent this year, even more than predicted six months ago. Sources said that such figures are possible because of an "accrued system of accounting" which counts gas once it is produced, whether it is paid for or not.

The positive numbers do little to help the country with its cash shortage and debt problem. They also fail to address Turkmenistan's economic difficulties over time.

In the IMF's new publication of the World Economic Outlook, released in the past week, Turkmenistan is ranked lowest in several categories among the CIS countries for the years 1994 through 1998. Its average growth rate has declined by 11 percent a year during the period, while its exports have fallen by an annual average of 22 percent. Its labor productivity has dropped by an average of 12 percent.

Unlike other CIS nations, Turkmenistan has not agreed to an IMF program. As a result, it cannot turn to the IMF for loans.

The IMF also quotes the European Bank for Reconstruction and Development, which has assigned Turkmenistan the lowest "transition indicator" in the CIS. The rating is a measure of the country's lack of progress in instituting reforms.

Such figures are not publicized in Turkmenistan, nor are they likely to be improved by firing the country's banking officials. Financing is difficult for Turkmenistan because of its economic problems but also because of its lack of transparency.

Complete accounting and regular reporting would be a first step toward addressing Turkmenistan's problems. The government may find it politically troubling, but it can hope for little help without transparency.