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The 2008 Economic Crisis

Turkmenistan devalued its currency by 19 percent versus the dollar, the first depreciation in almost seven years, as slumping energy prices and the weaker Russian ruble pressure former Soviet states. The country’s central bank weakened the manat to a 3.5 per dollar as of Jan. 1 from 2.85 previously, data on the Central Bank of Turkmenistan’s website show. That’s the first change in the currency peg since May 2008, according to data compiled by Bloomberg. The depreciation comes as oil slid to the weakest level since May 2009 and natural gas tumbled to a four-month low in Europe, curtailing the earnings prospects for central Asian energy producers. Russia’s financial crisis, spurred by sanctions over the Ukraine conflict and Brent crude’s 48 percent drop last year, is raising speculation that countries including Turkmenistan’s northern neighbor Kazakhstan will need to devalue to keep exports competitive. The ruble weakened 41 percent versus the dollar in 2014.
The reality is that there is pressure from falling oil prices and there are potential benefits from weaker currencies locally,” Mark Rubinstein, the head of the corporate business department at OOO Yar-Bank in Moscow, said by phone today. “A weaker currency is good for a state budget, it’s good for exporters as it cuts their local costs.”
Kazakhstan, central Asia’s biggest oil exporter, will let its tenge drop by 10 percent this quarter to boost competitiveness versus Russia, its biggest trading partner, Bank of America Corp. economist Vladimir Osakovskiy said last month. The country depreciated its currency by 19 percent in February, citing the weakening ruble. “Pegged currencies of neighboring trade partners are under big pressure” from the ruble’s drop, Vladimir Miklashevsky, a strategist at Danske Bank A/S in Helsinki, said by e-mail. “The next will be the Kazakh tenge. We expect a 35 percent devaluation in the first quarter.”
Russia’s budget surplus more than doubled to 1.27 trillion rubles ($21 billion) in the first 11 months of 2014 as the ruble’s plunge offset the drop in oil. Brent declined 1.6 percent to $56.44 a barrel by 6:45 p.m. in London.

Turkmenistan was ruled by President for Life Saparmurat Niyazov until his death in 2006. Gurbanguly Berdimuhamedow was elected president in 2007. According to Human Rights Watch, "Turkmenistan remains one of the world’s most repressive countries. The country is virtually closed to independent scrutiny, media and religious freedoms are subject to draconian restrictions, and human rights defenders and other activists face the constant threat of government reprisal." President Berdimuhamedow promotes a personality cult in which he, his relatives, and associates enjoy unlimited power and total control over all aspects of public life.

The country possesses the world's fourth-largest reserves of natural gas and substantial oil resources. Turkmenistan has taken a cautious approach to economic reform, hoping to use gas and cotton sales to sustain its economy. In 2004, the unemployment rate was estimated to be 60%.Between 1998 and 2002, Turkmenistan suffered from the continued lack of adequate export routes for natural gas and from obligations on extensive short-term external debt. At the same time, however, the value of total exports has risen sharply because of increases in international oil and gas prices. Economic prospects in the near future are discouraging because of widespread internal poverty and the burden of foreign debt.President Niyazov spent much of the country's revenue on extensively renovating cities, Ashgabat in particular. Corruption watchdogs voiced particular concern over the management of Turkmenistan's currency reserves, most of which are held in off-budget funds such as the Foreign Exchange Reserve Fund in the Deutsche Bank in Frankfurt, according to a report released in April 2006 by London-based non-governmental organization Global Witness. According to the decree of the Peoples' Council of 14 August 2003, electricity, natural gas, water and salt will be subsidized for citizens up to 2030. In addition car drivers were entitled to 120 litres of free petrol a month until 1/7/14. Drivers of buses, lorries and tractors could get 200 litres of fuel and motorcyclists and scooter riders 40 litres free. On 5 September 2006, after Turkmenistan threatened to cut off supplies, Russia agreed to raise the price it pays for Turkmen natural gas from $65 to $100 per 1,000 cubic meters. Two-thirds of Turkmen gas goes through the Russian state-owned Gazprom.

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The manat is the currency of Turkmenistan. It was introduced on 1 November 1993, replacing the Russian ruble at a rate of 1 manat = 500 rubles. The ISO 4217 code was TMM, and the manat was subdivided into 100 tenge. The abbreviation m is sometimes used, e.g., 25 000 m is twenty-five thousand manat.

On January 1, 2009, the new manat was introduced with ISO 4217 code TMTat the rate of 5000 old manat to 1 new manat. In 1993, coins were introduced in denominations of 1, 5, 10, 20 and 50 tenge. The 1, 5 and 10 tenge were struck in copper-plated-steel, with the higher denominations in nickel-plated-steel. This first series of coins was short-lived as their metal value soon became worth more than their actual face value. After a period of high inflation, new coins of 500 and 1,000 manat were introduced in 1999. All coins of this period had to depict a picture of the president by law. During the monetary reform of 2009, new coins of 1, 2, 5, 10, 20 and 50 tenge were issued with bimetallic 1 and 2 manats following in 2010. The 1, 2, and 5 tenge are nickel-plated steel while the 10, 20, and 50 tenge are made of brass. Instead of depicting the current head of state the coins feature a map of Turkmenistan with the Independence Tower superimposed in front of it. All circulating coins of Turkmenistan have been minted by the Royal Mint In 1993, manat notes were introduced in denominations of 1, 5, 10, 20, 50, 100 and 500 manat, replacing the Soviet ruble. These were followed by notes for 1,000 manat in 1995 and 5,000 and 10,000 manat in 1996. In 2005, a new series of notes was introduced in denominations of 50, 100, 500, 1,000, 5,000 and 10,000 manat. All notes, with exception to only the 1 and 5 manats bear a portrait of former president Saparmurat Niyazov. All Turkmen banknotes are produced by the De La Rue printing and Banknote Company.In 2005, a new series of manat banknotes was introduced.

They had originally been intended to replace the first manat at a fixed rate, with 1000 equal to 1 of the first manat, but the revaluation was postponed and the issue released to circulate with previous manat issues. The series of notes was introduced in denominations of 50, 100, 500, 1,000, 5,000 and 10,000 manat. Two new coins were also introduced in only two denominations, 500 and 1,000 manat. Both the first and second issue manat banknotes circulated in tandem until the issue of the Second Manat (revalued) issue in 2009. After hyperinflation significantly devalued the currency, a new manat with a fixed exchange rate was introduced, replacing the old manat on a ratio of 5000 OM = 1 NM. The banknotes are printed in denominations of 1, 5, 10, 20, 50, 100, and 500 new manat. As part of an effort by the Turkmen government to dismantle the Niyazov cult of personality and help politically disambiguate the current rule, only the highest valued banknote, 500 manat, bears a portrait of the former leader. The 500 manat notes have not yet been released into circulation. The other denominations feature images of buildings in Ashgabat and portraits of Ahmed Sanjar, Oghuz Khan, Magtymguly Pyragy and other figures in Turkmen history.