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HomeEconomicsGurbanguly Berdimuhamedov’s Financial Legacy – The Diplomat

Gurbanguly Berdimuhamedov’s Financial Legacy – The Diplomat


Gurbanguly Berdimuhamedov turned the president of Turkmenistan in February 2007 following the dying of the nation’s first president, Saparmurat Niyazov. Berdimuhamedov served as president for 15 years, till February 2022 when his son, Serdar, ascended to the presidency. The financial system of Turkmenistan grew exponentially throughout the first a part of Berdimuhamedov’s presidency from 2007 to 2014 because of a better quantity of fuel exports, in addition to record-breaking excessive fuel costs, which helped generate billions of {dollars} from exports. The nation’s financial output has considerably declined since 2015 because of decrease costs of pure fuel and the discontinuation of fuel exports to Russia and Iran. The second a part of Berdimuhamedov’s presidency was marked by financial disaster, inflation, and hovering black-market trade charges.

Macroeconomic Indicators

The nominal GDP of Turkmenistan underneath the presidency of Berdimuhamedov grew from $12.66 billion in 2007 to $45.23 billion in 2019, in response to World Financial institution figures. GDP progress charges haven’t been up to date on the Financial institution’s web site since 2020 because of an absence of dependable information of ample high quality. GDP progress was uninterrupted from 2007 to 2014, then dropped sharply and recovered solely by 2019. 

There are two issues in analyzing the GDP of Turkmenistan. GDP progress within the nation was closely impacted by the rising quantity of exports of pure sources (largely pure fuel), which was the first export of the nation (86.3 % of all exports). Pure fuel is an extractive sector and doesn’t require human capital, innovation, or constructing factories by way of industrialization, and it doesn’t make use of many individuals. Furthermore, with the assistance of fuel income, the federal government spent billions of {dollars} on unproductive massive tasks such because the Awaza vacationer zone, AIMAG (the Asian Indoor and Martial Arts Video games), accommodations and monuments, and at present the development of a brand new administration middle for the Ahal area, in addition to building of the brand new Ashgabat Metropolis. The federal government reportedly spent round $2 billion on the Awaza undertaking and $10 billion to arrange the AIMAG, and at present 2,500 building tasks are underway, which is able to value the state funds over $37 billion. Since authorities spending is included as a part of the GDP calculation, such massive building tasks have artificially raised the GDP of Turkmenistan with out reflecting truly widespread financial progress. The Turkmen on-line journal Progres.on-line estimates that authorities spending accounts for nearly half of the annual GDP of the nation.

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Moreover, the GDP of Turkmenistan is calculated within the native forex, the manat, and reported in U.S. {dollars} primarily based on the official trade charge. Turkmenistan has two parallel trade charges: the official trade charge ($1=3.5 manat) and the black market trade charge ($1=19.5 manat). Due to this fact, one can assume that the precise GDP of the nation could be utterly totally different — and much decrease — had it been reported primarily based on the black market trade charge. 

The Good Outdated Trade Charge Drama 

The black-market trade charge just isn’t the product of Berdimuhamedov’s presidency, its creation stretches  again to the period of the primary president, Niyazov (additionally known as Turkmenbashy, that means “The chief of Turkmens”). Promoting and shopping for foreign currency was forbidden throughout the Niyazov period beginning in 1998 and such restrictions had been lifted within the second 12 months of Berdimuhamedov’s presidency in 2008. Albeit with some restrictions on the quantity of greenback trade, the trade of currencies was largely allowed to all residents. The trade charge was set at a hard and fast charge, first at 2.8 manat/$1, and later at 3.5 manat/$1. In consequence, residing requirements improved within the nation due to a budget trade charge, which helped common residents afford imported automobiles, electronics, and different merchandise. 

Nonetheless, the free trade of currencies has been severely restricted since 2016 as a result of decrease variety of laborious currencies coming into the nation, which was a results of declining costs of pure fuel and the discontinuation of fuel exports to Russia and Iran. Restrictions on the free trade of currencies paved the way in which for the rise of one more black market trade charge in Turkmenistan however this time underneath the presidency of Berdimuhamedov. The black market charge reached as much as 40 manat/$1 in April 2021, which was 11 occasions costlier than the official trade charge. Then it began to slowly decline and reached round 19.5 manat as of writing, which continues to be 5 occasions costlier in comparison with the official trade charge. 

In relation to salaries, the 2022 minimal month-to-month wage within the nation is 1,050 manat and the common month-to-month wage is 2,040 manat. Utilizing the official trade charge, these figures equal $299.69 and $582.26, respectively; however underneath the black-market charge they’re price solely round $54 and $105. It’s an enormous distinction.

Excessive Inflation

On account of the rising black market trade charge, every thing turned costlier, and inflation soared within the nation. Turkmenistan has not but undergone full industrialization and home manufacturing is just too low to satisfy the calls for of shoppers. As a result of low cost trade charge within the first half of Berdimuhamedov’s presidency, the nation largely imported the vast majority of its shopper merchandise.

Though the federal government doesn’t publicly share any information concerning inflation charges within the nation, one can glean details about inflation in Turkmenistan from worldwide organizations, lecturers, and various third-party sources. IMF’s forecasted inflation charge within the nation ranges from 6 %  to 21 % for the interval between 2016 and 2021, whereas Steve Hanke from John Hopkins College assessed the inflation charge in Turkmenistan from 50 % in 2017 to 350 % in mid-2018 and again to 50 % in 2021. The “Palaw Index” from Progres.on-line measures month-to-month inflation in Turkmenistan by monitoring the worth of elements for the well-known Turkmen dish palaw reminiscent of sunflower oil, beef, onions, carrots, rice, and flour. In response to the Palaw Index, year-on-year inflation was 45 % in January, 20 % in February and 16 % in March of 2022. 

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Supply: Hanke’s Inflation Satellite tv for pc

Conclusion

The start of Berdimuhamedov’s presidency was marked by excessive financial progress brought on by excessive fuel costs and bigger volumes of exports till 2014. Nonetheless, as an alternative of investing the additional income gained by way of fuel exports in these years towards well being, training, and laborious infrastructure, the federal government wasted nearly the entire income on constructing monuments, airports, luxurious accommodations, and the underused Awaza vacationer zone, in addition to internet hosting the AIMAG. Regardless of excessive progress to start with, excessive inflation and a hovering black-market trade charge turned the legacies of Berdimuhamedov’s time in workplace. 

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