Identifier
Created
Classification
Origin
07ASHGABAT1390
2007-12-26 03:36:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Ashgabat
Cable title:
TURKMENISTAN'S 2008 STATE BUDGET: STILL OPAQUE, STILL
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UNCLAS SECTION 01 OF 02 ASHGABAT 001390
SIPDIS
SENSITIVE
SIPDIS
STATE FOR SCA/CEN, EUR/RUS, EUR/CARC, EEB
STATE PLEASE PASS TO USTDA DAN STEIN
E.O. 12958: N/A
TAGS: PGOV PREL ECON EFIN TX
SUBJECT: TURKMENISTAN'S 2008 STATE BUDGET: STILL OPAQUE, STILL
CONFUSING
UNCLAS SECTION 01 OF 02 ASHGABAT 001390
SIPDIS
SENSITIVE
SIPDIS
STATE FOR SCA/CEN, EUR/RUS, EUR/CARC, EEB
STATE PLEASE PASS TO USTDA DAN STEIN
E.O. 12958: N/A
TAGS: PGOV PREL ECON EFIN TX
SUBJECT: TURKMENISTAN'S 2008 STATE BUDGET: STILL OPAQUE, STILL
CONFUSING
1. (U) Sensitive but unclassified. Not for public Internet.
2. (SBU) SUMMARY: The 2008 State Budget that Turkmenistan's
President Berdimuhamedov approved on December 14 has grown by 20% in
nominal terms to slightly over 123 trillion manats ($23.7 billion at
the official rate). Even at the worst-case-scenario inflation
figure of 10% in 2008 predicted by experts, the 2008 budget earmarks
significantly more funds than last year, including to local budgets
and the social sector. However, in 2008 the Government of
Turkmenistan will continue to use numerous off-budgetary funds that
accumulate large amounts of foreign exchange to finance public
expenditure, particularly big infrastructure projects. END
SUMMARY.
TWENTY PERCENT BUDGET INCREASE
3. (SBU) The 123 trillion-manat budget represents a 20% nominal
growth over the 2007 budget. Even using the least optimistic expert
estimates of about 10% inflation in 2008, this is still a
significant budget increase. Turkmenistan's own estimate for
inflation at the end of 2007 is around 6%.
SAME TWO-TIER BUDGET STRUCTURE
4. (SBU) Turkmenistan's budget structure remains confusing because
it is difficult to calculate the amount of money spent from the
formal budget in overall public spending. The country's public
financing includes a two-tier state budget and the Foreign Exchange
Reserve Fund (FERF),which is outside the budget.
5. (SBU) Tier 1 is tax revenue. Tier 1 revenue finances the
government, including local government, law enforcement, education,
social welfare, healthcare, and culture ministries and agencies, as
well as construction of communal/residential buildings. In the 2008
budget, Tier 1 is around 31 trillion manats, or 25% of the total
state budget. Tier 2 is comprised of monetary revenue of various
state funds (93 trillion manats in the 2008 budget year, or around
75% of the overall state budget). In 2008, tier 1 expenditure will
grow by 19%, while tier 2 expenditure will increase by 20%.
LOCAL BUDGETS TO GROW
6. (SBU) Local budgets are part of Tier 1. The projected local
revenue that comes from insignificant local duties and a percentage
of the Value Added Tax (VAT),Corporate Income Tax and Mineral
Resources Tax is not sufficient to finance planned local public
expenditure. Unlike 2007, the government in 2008 will return to an
earlier practice of subventing local budgets. The 2008 subventions
will equal about 2 trillion manats, which would increase local
budgets by nominal 28% over that of 2007.
TIER TWO AND SINGLE EXCHANGE RATE
7. (SBU) Tier 2 consists of almost a dozen state off-budgetary
funds that rely heavily on large volumes of foreign exchange
purchased at the official subsidized rate. Thus an elimination of
tier 2 (i.e. state off-budgetary funds) is inherently linked with a
unification and potential depreciation of the official exchange rate
(currently 5,200 manats)[NOTE: Other significant foreign exchange
amounts are generated in the Foreign Exchange Reserve Fund, FERF.
END NOTE]. Although such depreciation would increase budgetary
revenues, the Government is not willing, at least in 2008, to move
off-budgetary public operations to the budget and increase the manat
cost of off-budgetary government spending.
DEFICIT
8. (SBU) The 123 trillion-manat budget provides for a deficit of
5.2 trillion ($1 billion at the official exchange rate of 5,200
manat per dollar). According to the published budget, this deficit
will be financed from the surplus budget funds from previous years.
The 2006 budget surplus stood at 6.2 trillion manat.
ASHGABAT 00001390 002 OF 002
9. (SBU) COMMENT: The budget continues to lack transparency and
clarity, and misrepresents real spending patterns. Elimination of
the Tier 2 budget could have been an important step towards
unification of the exchange rate. Whether the Government of
Turkmenistan is genuinely planning to move toward a single exchange
rate, or simply lacks expertise remains a question. Technical
support from the U.S. Treasury could help Turkmenistan design an
appropriate strategy. END SUMMARY.
HOAGLAND
SIPDIS
SENSITIVE
SIPDIS
STATE FOR SCA/CEN, EUR/RUS, EUR/CARC, EEB
STATE PLEASE PASS TO USTDA DAN STEIN
E.O. 12958: N/A
TAGS: PGOV PREL ECON EFIN TX
SUBJECT: TURKMENISTAN'S 2008 STATE BUDGET: STILL OPAQUE, STILL
CONFUSING
1. (U) Sensitive but unclassified. Not for public Internet.
2. (SBU) SUMMARY: The 2008 State Budget that Turkmenistan's
President Berdimuhamedov approved on December 14 has grown by 20% in
nominal terms to slightly over 123 trillion manats ($23.7 billion at
the official rate). Even at the worst-case-scenario inflation
figure of 10% in 2008 predicted by experts, the 2008 budget earmarks
significantly more funds than last year, including to local budgets
and the social sector. However, in 2008 the Government of
Turkmenistan will continue to use numerous off-budgetary funds that
accumulate large amounts of foreign exchange to finance public
expenditure, particularly big infrastructure projects. END
SUMMARY.
TWENTY PERCENT BUDGET INCREASE
3. (SBU) The 123 trillion-manat budget represents a 20% nominal
growth over the 2007 budget. Even using the least optimistic expert
estimates of about 10% inflation in 2008, this is still a
significant budget increase. Turkmenistan's own estimate for
inflation at the end of 2007 is around 6%.
SAME TWO-TIER BUDGET STRUCTURE
4. (SBU) Turkmenistan's budget structure remains confusing because
it is difficult to calculate the amount of money spent from the
formal budget in overall public spending. The country's public
financing includes a two-tier state budget and the Foreign Exchange
Reserve Fund (FERF),which is outside the budget.
5. (SBU) Tier 1 is tax revenue. Tier 1 revenue finances the
government, including local government, law enforcement, education,
social welfare, healthcare, and culture ministries and agencies, as
well as construction of communal/residential buildings. In the 2008
budget, Tier 1 is around 31 trillion manats, or 25% of the total
state budget. Tier 2 is comprised of monetary revenue of various
state funds (93 trillion manats in the 2008 budget year, or around
75% of the overall state budget). In 2008, tier 1 expenditure will
grow by 19%, while tier 2 expenditure will increase by 20%.
LOCAL BUDGETS TO GROW
6. (SBU) Local budgets are part of Tier 1. The projected local
revenue that comes from insignificant local duties and a percentage
of the Value Added Tax (VAT),Corporate Income Tax and Mineral
Resources Tax is not sufficient to finance planned local public
expenditure. Unlike 2007, the government in 2008 will return to an
earlier practice of subventing local budgets. The 2008 subventions
will equal about 2 trillion manats, which would increase local
budgets by nominal 28% over that of 2007.
TIER TWO AND SINGLE EXCHANGE RATE
7. (SBU) Tier 2 consists of almost a dozen state off-budgetary
funds that rely heavily on large volumes of foreign exchange
purchased at the official subsidized rate. Thus an elimination of
tier 2 (i.e. state off-budgetary funds) is inherently linked with a
unification and potential depreciation of the official exchange rate
(currently 5,200 manats)[NOTE: Other significant foreign exchange
amounts are generated in the Foreign Exchange Reserve Fund, FERF.
END NOTE]. Although such depreciation would increase budgetary
revenues, the Government is not willing, at least in 2008, to move
off-budgetary public operations to the budget and increase the manat
cost of off-budgetary government spending.
DEFICIT
8. (SBU) The 123 trillion-manat budget provides for a deficit of
5.2 trillion ($1 billion at the official exchange rate of 5,200
manat per dollar). According to the published budget, this deficit
will be financed from the surplus budget funds from previous years.
The 2006 budget surplus stood at 6.2 trillion manat.
ASHGABAT 00001390 002 OF 002
9. (SBU) COMMENT: The budget continues to lack transparency and
clarity, and misrepresents real spending patterns. Elimination of
the Tier 2 budget could have been an important step towards
unification of the exchange rate. Whether the Government of
Turkmenistan is genuinely planning to move toward a single exchange
rate, or simply lacks expertise remains a question. Technical
support from the U.S. Treasury could help Turkmenistan design an
appropriate strategy. END SUMMARY.
HOAGLAND