Gurbanguly Berdimuhamedov became president of Turkmenistan in February 2007 following the death of the country’s first president, Saparmurat Niyazov. Berdimuhamedov served as president for 15 years, until February 2022, when his son, Serdar, took over the presidency. The economy of Turkmenistan grew exponentially during the first part of Berdimuhamedov’s presidency from 2007 to 2014 due to a larger volume of gas exports, as well as record high gas prices, which helped generate billions of dollars from exports. The country’s economic production has fallen significantly since 2015 due to lower natural gas prices and cessation of gas exports to Russia and Iran. The second part of Berdimuhamedov’s presidency was marked by economic crisis, inflation, and soaring black market rates.
Nominal GDP in Turkmenistan under the Berdimuhamedov presidency grew from $ 12.66 billion in 2007 to $ 45.23 billion in 2019, according to World Bank speak up. GDP growth rates have not been updated on the bank’s website since 2020 due to a lack of reliable data of sufficient quality. GDP growth was uninterrupted from 2007 to 2014, then fell sharply and recovered only in 2019.
In addition, GDP in Turkmenistan is calculated in local currency, manat, and reported in US dollars based on the official exchange rate. Turkmenistan has two parallel exchange rates: the official exchange rate ($ 1 = 3.5 months) and the black market rate ($ 1 = 19.5 months). Therefore, one can assume that the country’s actual GDP could be completely different – and far lower – if it had been reported based on the black market rate.
The good old exchange rate drama
The exchange rate on the black market is not a product of the Berdimuhamedov presidency, its emergence dating back to the era of the first president, Niyazov (also called Turkmenbashy, meaning “leader of the Turkmen”). The sale and purchase of foreign currency was banned during the Niyazov era, which began in 1998, and such restrictions were lifted in the second year of Berdimuhamedov’s presidency in 2008. Although with some restrictions on the volume of dollar exchange, currency exchange was largely allowed for all citizens. The exchange rate was set at a fixed rate, first at 2.8 manat / $ 1, and later at 3.5 manat / $ 1. As a result, the standard of living in the country was improved thanks to the cheap exchange rate, which helped average citizens to afford imported cars, electronics and other products.
However, the free exchange of currencies has been severely restricted since 2016 due to the lower number of hard currencies entering the country, which was a result of falling natural gas prices and cessation of gas exports to Russia and Iran. Restrictions on the free exchange of currencies paved the way for the rise of yet another black market exchange rate in Turkmenistan, but this time during Berdimuhamedov’s presidency. The black market exchange rate reached 40 manat / $ 1 in April 2021, which was 11 times more expensive than the official exchange rate. Then it slowly began to decline and at the time of writing reached around 19.5 manat, which is still five times more expensive compared to the official exchange rate.
When it comes to pay, in 2022 the minimum monthly salary in the country is 1,050 manat and the average monthly salary is 2,040 manat. Using the official exchange rate, these figures correspond to $ 299.69 and $ 582.26, respectively; but below the black market price, they are only worth around $ 54 and $ 105. That’s a huge difference.
As a result of the growing black market price, everything became more expensive and inflation rose sharply in the country. Turkmenistan has not yet undergone full industrialization and domestic production is too low to meet consumer demands. Due to the cheap exchange rate in the first half of Berdimuhamedov’s presidency, the country imported the vast majority of its consumer products.
Although the government does not publicly share any data on inflation rates in the country, one can retrieve information on inflation in Turkmenistan from international organizations, academics and alternative third party sources. IMFThe country’s expected inflation rate varies from 6 percent to 21 percent for the period between 2016 and 2021, while Steve Hanke from John Hopkins University estimated the inflation rate in Turkmenistan from 50 percent in 2017 to 350 percent in mid-2018 and back to 50 percent in 2021.Palaw index”From Progres.online measures monthly inflation in Turkmenistan by tracking the price of ingredients for the famous Turkmen dish palaw such as sunflower oil, beef, onions, carrots, rice and flour. According to the Palaw Index, year-on-year inflation was 45 percent in January, 20 percent in February and 16 percent in March 2022.
Source: Hanke’s Inflation Satellite
The beginning of Berdimuhamedov’s presidency was marked by high economic growth caused by high gas prices and large volumes of exports until 2014. But instead of investing the extra revenue gained through gas exports in those years, in health, education and hard infrastructure almost wasted all proceeds from building monuments, airports, luxury hotels and the underutilized Awaza tourist zone, as well as hosting AIMAG. Despite high growth in the beginning, high inflation and a soaring exchange rate on the black market became the legacy of Berdimuhamedov’s time in office.