Turkmenistan has a plan to fix its ever-troubled domestic currency, the manat – and that plan is to dispense with cash as much as possible.
The desire to go cash-free is being spun as a nod to economic modernization, although all available evidence points to the move being motivated by a stubborn liquidity crisis that shows no sign of abating.
At a regular end-of-week government meeting, President Gurbanguly Berdymukhamedov on March 24 listened to one of his deputy prime ministers provide an update on planned improvements to the banking system.
Byashimmyrat Hojamammedov, the Cabinet’s point-man on economic affairs, reminded the president that under a decree adopted more than three years ago, state workers began in January 2016 to receive their salaries on their bank cards. Pensions, disability allowances, benefits and student stipends are likewise paid onto cards. Foreign companies based in Turkmenistan were also required to pay local staff that way – exclusively in manat – from the start of 2016.
The 2013 decree stipulated that in line with this measure, shops and businesses in the service sector should install the equipment required to process payments with those cards. By all appearances, this side of things has been slow.
Hojamammedov said work is now under way to broaden the scope for cashless transactions.
“The head of state instructed the deputy premier to carefully analyze this issue and prepare proposals,” state media reported.
One rumored possibility is that the authorities are bracing to force all traders, down to market traders, to install bank card payment terminals – currently a rare sight outside the more advanced retailers in the region.
Similar attempts to usher in demonetization of the economy have long been practiced in neighboring Uzbekistan, whose national currency, the sum, is also subject to recurrent fluctuations. Those efforts have not worked as officials had envisioned.
The process of weaning people off cash is being implemented gradually for now.
Ahead of the New Year, people using their cards to withdraw cash from ATMs noticed that they were being charged a 1 percent commission. That was amended to 0.5 percent in January.
As no commission is charged for transactions made through payment terminals, such charges appear like a nudge toward changing spending patterns.
By way of another forced inducement into greater adoption of Mastercard and Visa cards, authorities last year put a stop to official foreign currency exchanges in cash. All but a few people wishing to provide funds to relatives living abroad are still able to do so by wiring dollars and euros, which are increasingly hard to find anyhow. Instead, they are encouraged to use international payment card systems.
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.
The State Bank for Foreign Economic Affairs eagerly advertises its Visa cards as a way for Turkmen families to support their children studying overseas.
“Your son or daughter to study abroad? Are you worried about them?” the bank asks in a promotional message on the English language version of its website. “Open them international card VISA in the State Bank for Foreign Economic Affairs of Turkmenistan.”
But when it comes to turning money in an account into actual hard cash, things are more tricky.
RFE/RL’s Turkmen service, Radio Azatlyk, reported in February that restrictions on daily withdrawals from ATMs have gradually been spreading across the country.
“In Dashoguz, the daily limit is no more than 100 manat (NB. $28.5 at the official rate, although the actual buying power implied is much lower). In the cities and regional center of the Balkan region, it is 300 manat daily. Now the restrictions are hitting the residents of [the capital] Ashgabat, too,” Azatlyk reported.
A teacher in Ashgabat told Azatlyk that of the pay transferred to their account in January, they were only able to withdraw 1,000 manat on any given day.
Even that is fanciful, however, since ATMs are few and the ones that do exist are often empty or out of order.
The situation is particularly acute for entrepreneurs engaged in any form of cross-border trade. Under a rule that came into force on February 6, Turkmen bank account holders have been limited to withdrawing around $300 while abroad.
“Until now, I was able to take out $10,000 daily from my account. Now my business is in doubt,” one trader told Azatlyk on condition of anonymity.
Without the ability to handle useful amounts of cash, people dealing in imports are left high and dry.
This development is particularly frustrating as the Turkmen central bank’s obstinate refusal to allow the official exchange rate to slide from its current rate of around 3.5 to the dollar has actually been a boon to entrepreneurs in the import business.
The authorities appear to hope that any decline in the fortune of importers will be more than made up for by the ascendancy of local producers. Import substitution is at the heart of Berdymukhamedov’s vision for revitalizing the nation’s economy and weaning it off crippling reliance on the export of natural gas – the value of which has stagnated.
Despite the hiccups, authorities in Ashgabat insist that all is well.
The government announced in February that the economy had expanded by 6.2 percent in 2016. According to officials, there is not one single sector that is experiencing any trouble, including trade, which the government claims increased by 14 percent.
While bodies like the International Monetary Fund have typically reproduced such figures without demurral, a recent mission by the institution dropped an important hint that record-keeping is likely awry – a suspicion widely held by watchers of the region.
“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,” the IMF said in a statement on March 21.
Article by EurasiaNet