What’s Behind Sudden Manat Devaluation?
Turkmenistan rang in the New Year by dramatically devaluing its national currency, the manat, and introducing a steep levy on the price of petrol.
The scale of the devaluation – comparable to the 19 percent devaluation of the tenge in Kazakhstan earlier in the year – comes as all Central Asian economies are feeling the downturn in Russia, where the ruble lost 45 percent of its value against the dollar in 2014. But it is still somewhat surprising because Turkmenistan’s is the region’s economy least dependent on exports to its former colonial master.
Indeed, the manat was the only Central Asian currency to maintain its value in 2014.
AFP reported January 1 that the Turkmen central bank had published a rate of 3.50 manats to the dollar, down from the 2.85 that had held since 2009—a devaluation of 18.6 percent. The government has not commented.
Noting that a liter of popular 95-octane petrol had also jumped overnight – from 0.62 manats to 1 – The Chronicles of Turkmenistan, a news blog run by Turkmen exiles, feared significant inflation would follow.
While getting reliable economic news out of Ashgabat is difficult, one potential explanation for the devaluation is the weak oil price. Crude and refined oil account for up to a tenth of Turkmen exports. Prices for natural gas, worth 80 percent of the country’s export total, are also depressed, but this should not affect Ashgabat's long-term contracts with major buyer China.
Another possibility is that the government devalued the manat strategically to help the country diversify trade. In recent years, Turkmenistan’s economic model has become dependent on selling hydrocarbons to China, making the country look like a colony of Beijing. During a November visit to Ashgabat, Russian Prime Minister Dmitri Medvedev offered Turkmenistan the chance to fill a hole in the Russian market caused by Moscow’s countersanctions against Western food products. With the ruble so low compared with the manat, Turkmenistan’s few exports to Russia were uncompetitive.
There could be a simpler reason yet: The graft-prone Turkmen government could be running out of cash to support the manat and felt reasonably confident it could devalue without even the modest unrest that greeted Kazakhstan’s tenge devaluation in February.
In recent times the cowed Turkmen population has hardly peeped as the government eroded expensive state subsidies that cushion against the stress and strain of living in a totalitarian regime. The government meanwhile has begun to emphasize sustainability over handouts.
Last April President Gurbanguly Berdymukhamedov ended petrol rations for private car and motorcycle drivers. Over the last eight years, the government has allowed prices at the pump to rise ten times. At the beginning of last year, Ashgabat introduced prices for natural gas for the first time since 1993.
In August and November city officials did meet rare civic resistance when attempting to remove air conditioners from flats in Ashgabat, where summer temperatures can exceed 50 degrees Celsius. It is unclear if the city’s notoriously vain officials were simply offended by the sight of the air-conditioning units, or if they were trying to conserve electricity.