Identifier
Created
Classification
Origin
08ASHGABAT1214
2008-09-15 04:20:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Ashgabat
Cable title:
TURKMENISTAN ANNOUNCES NEW CURRENCY DENOMINATION PLAN
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UNCLAS ASHGABAT 001214
SENSITIVE
SIPDIS
STATE FOR SCA/CEN, EEB
PLEASE PASS TO USTDA DAN STEIN
E.O. 12958: N/A
TAGS: PREL PGOV EFIN ECON TX
SUBJECT: TURKMENISTAN ANNOUNCES NEW CURRENCY DENOMINATION PLAN
UNCLAS ASHGABAT 001214
SENSITIVE
SIPDIS
STATE FOR SCA/CEN, EEB
PLEASE PASS TO USTDA DAN STEIN
E.O. 12958: N/A
TAGS: PREL PGOV EFIN ECON TX
SUBJECT: TURKMENISTAN ANNOUNCES NEW CURRENCY DENOMINATION PLAN
1. (U) Sensitive but unclassified. Not for public Internet.
2. Summary: A new currency denomination plan to take effect in the
new year creates a new manat equal in value to 5000 of the manats
currently in circulation. Approximately 3 of the new manats will
equal one USD, as opposed to the current rate of 14,000 per USD.
The EBRD head of Mission believes that Turkmenistan has enough
foreign reserves to successfully defend a 3 manat/dollar exchange
rate for awhile. End Summary.
3. (U) The GOTX has announced a new currency denomination plan
effective January 1, 2009. Under it, one new manat will be equal in
value to 5000 currently circulated manats. The dollar/manat exchange
rate will go from roughly 14,000 manats to one USD to nearly 3
manats per USD. The new currency will be issued in 1, 5, 10, 20, 50,
100 and 200-manat banknotes, as well as 1, 2, 5, 10, 20 and 50-tenge
coins. According to a Central Bank official, the plan will
strengthen the manat's buying power, making it "one of the strongest
currencies in the region".
4. (U) The new plan, made public on September 8, differs with the
one first announced in April 2008 by an earlier decree. That plan
envisaged a redenomination in which 1000 currently circulated manats
would equal one new manat. The new decree requires commercial
entities, including all retail commodity and service providers, to
place price tags on goods in both the old and redenominated
currencies. There will be a two-year transition period, during
which both the old and new currencies will be accepted.
5. (SBU) EBRD Head of Mission Neil McKain said this decision was
positive and had certain practical benefits. They will have a "big"
currency, like the dollar, pound, or Euro. Central Bank officials
had told him that they wanted a comparable currency. In addition,
there would be "less room" for the government to manipulate the
currency. And, after a big spike in inflation following the
redenomination, McKain predicted that prices would settle down.
6. (SBU) McKain believed there would be at least one more shift in
the exchange rate between now and the end of the year, and that it
would be a shift down (there would be even fewer manat equal to the
dollar). Nevertheless, unless the government changed rules on
access to the money in one's own bank account (e.g., businesses can
only take out the amount of money equal to a bill they need to pay)
or makes electronic and bank transfers easier, Turkmenistan will
still have a cash economy.
7. (SBU) Regarding the value of the new manat, McKain believed that
Turkmenistan had enough foreign reserves to successfully defend an
exchange rate of 3/dollar (or even 1:1),for awhile. Gas exports
this year have increased 40%. One thing to watch, however, he said,
is if the population continues to maintain savings in dollars. That
will mean that they still have no faith in the national currency.
8. (SBU) COMMENT: According to our local staff, the announcement has
raised concern among the local population that in anticipation of
the redenomination, vendors will begin raising the price of food and
consumer goods between now and the end of the year. Historically,
any instability in the currency market or system has led to
increased inflation in the broader marketplace. END COMMENT.
CURRAN
SENSITIVE
SIPDIS
STATE FOR SCA/CEN, EEB
PLEASE PASS TO USTDA DAN STEIN
E.O. 12958: N/A
TAGS: PREL PGOV EFIN ECON TX
SUBJECT: TURKMENISTAN ANNOUNCES NEW CURRENCY DENOMINATION PLAN
1. (U) Sensitive but unclassified. Not for public Internet.
2. Summary: A new currency denomination plan to take effect in the
new year creates a new manat equal in value to 5000 of the manats
currently in circulation. Approximately 3 of the new manats will
equal one USD, as opposed to the current rate of 14,000 per USD.
The EBRD head of Mission believes that Turkmenistan has enough
foreign reserves to successfully defend a 3 manat/dollar exchange
rate for awhile. End Summary.
3. (U) The GOTX has announced a new currency denomination plan
effective January 1, 2009. Under it, one new manat will be equal in
value to 5000 currently circulated manats. The dollar/manat exchange
rate will go from roughly 14,000 manats to one USD to nearly 3
manats per USD. The new currency will be issued in 1, 5, 10, 20, 50,
100 and 200-manat banknotes, as well as 1, 2, 5, 10, 20 and 50-tenge
coins. According to a Central Bank official, the plan will
strengthen the manat's buying power, making it "one of the strongest
currencies in the region".
4. (U) The new plan, made public on September 8, differs with the
one first announced in April 2008 by an earlier decree. That plan
envisaged a redenomination in which 1000 currently circulated manats
would equal one new manat. The new decree requires commercial
entities, including all retail commodity and service providers, to
place price tags on goods in both the old and redenominated
currencies. There will be a two-year transition period, during
which both the old and new currencies will be accepted.
5. (SBU) EBRD Head of Mission Neil McKain said this decision was
positive and had certain practical benefits. They will have a "big"
currency, like the dollar, pound, or Euro. Central Bank officials
had told him that they wanted a comparable currency. In addition,
there would be "less room" for the government to manipulate the
currency. And, after a big spike in inflation following the
redenomination, McKain predicted that prices would settle down.
6. (SBU) McKain believed there would be at least one more shift in
the exchange rate between now and the end of the year, and that it
would be a shift down (there would be even fewer manat equal to the
dollar). Nevertheless, unless the government changed rules on
access to the money in one's own bank account (e.g., businesses can
only take out the amount of money equal to a bill they need to pay)
or makes electronic and bank transfers easier, Turkmenistan will
still have a cash economy.
7. (SBU) Regarding the value of the new manat, McKain believed that
Turkmenistan had enough foreign reserves to successfully defend an
exchange rate of 3/dollar (or even 1:1),for awhile. Gas exports
this year have increased 40%. One thing to watch, however, he said,
is if the population continues to maintain savings in dollars. That
will mean that they still have no faith in the national currency.
8. (SBU) COMMENT: According to our local staff, the announcement has
raised concern among the local population that in anticipation of
the redenomination, vendors will begin raising the price of food and
consumer goods between now and the end of the year. Historically,
any instability in the currency market or system has led to
increased inflation in the broader marketplace. END COMMENT.
CURRAN