Identifier
Created
Classification
Origin
07ASHGABAT1403
2007-12-31 06:10:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Ashgabat
Cable title:  

BERDIMUHAMEDOV DECREES CHANGES TO EXCHANGE RATE,

Tags:  PGOV ECON EFIN TX 
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RUEHPW RUEHROV RUEHVK RUEHYG
DE RUEHAH #1403 3650610
ZNR UUUUU ZZH
P 310610Z DEC 07
FM AMEMBASSY ASHGABAT
TO RUEHC/SECSTATE WASHDC PRIORITY 9947
INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUCNCIS/CIS COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHAK/AMEMBASSY ANKARA 3157
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RUEATRS/DEPT OF TREASURY WASHDC
RHEHNSC/NSC WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHDC
RUEKJCS/JOINT STAFF WASHDC
RUEKJCS/SECDEF WASHINGTON DC
RUEHVEN/USMISSION USOSCE 2039
UNCLAS ASHGABAT 001403 

SIPDIS

SENSITIVE
SIPDIS

STATE FOR SCA/CEN, EEB
AID/W FOR AA/EE

E.O. 12958: N/A
TAGS: PGOV ECON EFIN TX
SUBJECT: BERDIMUHAMEDOV DECREES CHANGES TO EXCHANGE RATE,
EMPHASIZES NEED FOR EXCHANGE RATE UNIFICATION

REF: A. ASHGABAT 1230

B. ASHGABAT 1129

C. ASHGABAT 1251

UNCLAS ASHGABAT 001403

SIPDIS

SENSITIVE
SIPDIS

STATE FOR SCA/CEN, EEB
AID/W FOR AA/EE

E.O. 12958: N/A
TAGS: PGOV ECON EFIN TX
SUBJECT: BERDIMUHAMEDOV DECREES CHANGES TO EXCHANGE RATE,
EMPHASIZES NEED FOR EXCHANGE RATE UNIFICATION

REF: A. ASHGABAT 1230

B. ASHGABAT 1129

C. ASHGABAT 1251


1. (U) Sensitive but unclassified. Not for public Internet.


2. (U) At a Cabinet of Ministers meeting on December 27,
President Gurbanguly Berdimuhamedov named "wide incorporation
of the principles of market economy" as a "priority task" for

2007. In preparation for achieving a unified exchange rate
by 2009 (Ref. A),Berdimuhamedov signed decrees directing the
Central Bank to set the unofficial exchange rate at no more
than 20,000 manats to the dollar and to increase the official
exchange rate from 5,200 to 6,250 manats to the dollar
beginning January 1, 2008. (NOTE: Local vendors reacted to
this news almost immediately on December 28, exchanging
manats for dollars at rates between 19,500 and 20,000 manat
per dollar. END NOTE.) Berdimuhamedov also decreed that all
Turkmen banks will have exchange booths, which any Turkmen
citizen will be able to use, and mandated that the Interbank
Currency Exchange -- a wing of the Central Bank --
electronically exchange foreign currency at the official rate
for all government funds, companies, agencies and
organizations.


3. (SBU) COMMENT: That Berdimuhamedov has continued
pressing for movement on the exchange rate issue is a good
sign, since unification of the two exchange rates will help
reduce opportunities for corruption for those in positions
that allow them to profit from these circumstances. However,
when these reforms take place, a real black market for hard
currency likely will develop if access to it is limited.
Because the reforms are progressing as they are -- by
top-down fiat and with what appears to be limited input from
international financial institutions -- it is unclear if
government officials are aware of this potential pitfall. We
expect Berdimuhamedov to continue to push for gradual merging
of the two exchange rates over the coming months, in an
effort to steer clear of the shock that he wants to avoid
(Ref. B and C). END COMMENT.
HOAGLAND