Can Turkmenistan pay its bills?
Prominent Turkish investor has alleged that the Turkmenistan government “has run out of financial resources” and questioned its ability to pay its bills.
Oguzhan Cakirolgu, a board member of a former Turkish investor in Turkmenistan, reportedly said the government had “run out of financial resources and it hasn’t been paying for finished contracts, let alone being able to pay for new ones”.
He went on to claim that the government of Turkmenistan, with the world’s fourth-largest gas reserves, “has not been paying companies for more than 3 years”.
Cakirolgu Group has now pulled out of the country.
The regime’s record appears to confirm the bleak picture Cakirolgu portrays: Polimeks, another Turkish contractor, has stopped work on a highway to connect the Caspian port of Turkmenbashi to the capital due to non-payment of debts.
Elsewhere, a Belarussian state-owned company is said to be still owed an outstanding debt of up to $52 million.
On the subject of government debt to foreign companies the foreign ministry and the Turkmen embassy in Ankara were unavailable for comment.
The allegations come as a delegation from the Central Asian country held talks at the German-Turkmen forum in Berlin last weekend as part of a lobbying campaign for Turkmen gas to enter EU markets.
The solvency of the Turkmen state, said to be the most unreformed of the post-Soviet Central Asian states, has recently come further into question with the announcement by its state media that the regime will no longer be providing free electricity, gas and drinking water.
The decree of the country’s president Gurbanguly Berdimuhamedov would bring to an end the free supply of utilities which have been supplied as a comprehensive universal provision since 2004.
The official state narrative is that subsidies are no longer necessary and that privatisation marks a small step towards developing a market economy.
But observers have indicated that the reality is that the nation is in experiencing an under-reported fiscal crisis.
They say the harsh reality is of bread lines and food riots thatthreaten to wreck the Turkic state, with yet another flour shortage reported in the district of Boldumsaz just this week.
Further evidence of the perilous state of the economy comes with the International Monetary Fund (IMF) estimating that the country has run a 3-digit current account deficit for the past 3 years and the US State Department publicly assessing that the country may well be in undeclared recession.
Since independence in 1991 Turkmenistan has accepted significant financing from IFIs including $4 billion from the Chinese Development Bank (CDB) and a second $4.1bn loan from the same bank.
But the black market value of the manat fell 17-18% against the dollar in 2017-18 and the IMF has declared that the government should cut spending or devalue its currency.
The poor financial outlook, it is argued, does not seem to deter the Turkmen government from spending on lavish state projects, however, including a gilded equestrian statute of the President, unveiled in 2015, a Soviet-style artificial lake project costing $4.5bn, and a $5bn indoor sports centre to host the niche Asian Indoor and Martial Arts Games.
However, with multiple arbitration cases pending against the Turkmen government before the International Centre for the Settlement of Investment Disputes (ICSI), a pattern of unpaid investors withdrawing from operations in Turkmenistan, a regime that is in “denial” about its national finances and with little to no sign of reform on the horizon, the economic outlook remains grim.