Identifier
Created
Classification
Origin
08ASHGABAT802
2008-06-27 05:45:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Ashgabat
Cable title:
TURKMENISTAN: EXCHANGE RATE DEPRECIATION ALLOWS
how-toVZCZCXRO4600 PP RUEHAG RUEHAST RUEHBI RUEHCI RUEHDF RUEHIK RUEHLH RUEHLN RUEHLZ RUEHPW RUEHROV RUEHVK RUEHYG DE RUEHAH #0802/01 1790545 ZNR UUUUU ZZH P 270545Z JUN 08 FM AMEMBASSY ASHGABAT TO RUEHC/SECSTATE WASHDC PRIORITY 1053 INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE PRIORITY RUCNCIS/CIS COLLECTIVE PRIORITY RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY RUEHAK/AMEMBASSY ANKARA PRIORITY 3946 RUEHBJ/AMEMBASSY BEIJING PRIORITY 1763 RUEHKO/AMEMBASSY TOKYO PRIORITY 1630 RUEHIT/AMCONSUL ISTANBUL PRIORITY 2199 RUEKJCS/JOINT STAFF WASHDC PRIORITY RHMFIUU/CDR USCENTCOM MACDILL AFB FL PRIORITY RUEKJCS/SECDEF WASHDC PRIORITY RUEAIIA/CIA WASHDC PRIORITY RHEHNSC/NSC WASHDC PRIORITY RHEFDIA/DIA WASHDC PRIORITY RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
UNCLAS SECTION 01 OF 02 ASHGABAT 000802
SENSITIVE
SIPDIS
STATE FOR SCA/CEN, EEB
E.O. 12958: N/A
TAGS: PREL PGOV EFIN ECON TX
SUBJECT: TURKMENISTAN: EXCHANGE RATE DEPRECIATION ALLOWS
GOVERNMENT TO INCREASE STATE BUDGET
UNCLAS SECTION 01 OF 02 ASHGABAT 000802
SENSITIVE
SIPDIS
STATE FOR SCA/CEN, EEB
E.O. 12958: N/A
TAGS: PREL PGOV EFIN ECON TX
SUBJECT: TURKMENISTAN: EXCHANGE RATE DEPRECIATION ALLOWS
GOVERNMENT TO INCREASE STATE BUDGET
1. (U) Sensitive but unclassified. Not for public Internet.
2. (SBU) SUMMARY: On June 25, Turkmenistan's Parliament passed an
adjusted State Budget for the 2008 financial year. The revision
took place due to the appreciation of the manat against the U.S.
dollar -- the currency of Turkmenistan's reserves. The budget has
increased by 93 trillion manats or almost 79%. However, the budget
structure has not been revised and remains opaque. END SUMMARY.
BUDGET INCREASE
3. (SBU) Turkmenistan's Mejlis (Parliament) on June 25 passed a new
law amending the 2008 State Budget previously approved on December
14, 2007. The adjusted budget has grown about 79%, from 118
trillion manats to 211 trillion manats. Government and social
spending account for 16% of the overall increase, while expenses of
state-owned enterprises represent 63%.
WHY THE INCREASE?
4. (SBU) A series of steps to depreciate the previous "official"
exchange rate of 5,200 manats per dollar to 14,200 manats per dollar
over the first half of the year allowed for additional budgetary
allocations in manats. An additional source of funding has been the
resources previously held in various extra-budgetary funds, which
was the standard practice under former President Niyazov but which
the current president vowed to bring under control. On February 4,
President Berdimuhamedov signed a decree eliminating 13
extra-budgetary funds that used to accumulate large amounts of
domestic currency and foreign exchange. According to the decree,
the funds have been transferred to the state budget and the Foreign
Exchange Reserve Fund (FERF). However, it is not clear what share
of funds went into the budget proper.
SAME TWO-TIER BUDGET STRUCTURE
5. (SBU) Turkmenistan's budget structure remains unchanged. It
consists of Tier 1 (tax revenue),Tier 2 (state-owned companies) and
the Foreign Exchange Reserve Fund (FERF),which is outside the
budget. Tier 1 finances the government, including local government,
law enforcement, education, social welfare, healthcare, culture
ministries and agencies, and the construction of
communal/residential buildings. In the revised 2008 budget, Tier 1
is around 43 trillion manats, or 20% of the total state budget,
while Tier 2 still dominates the budget with around 168 trillion
manats, or around 80% of the overall state budget. Compared with
the original 2008 budget, Tier 1 expenditure grew by 68%, while Tier
2 expenditure will increase by 82%.
LOCAL BUDGETS TO GROW EVEN MORE
6. (SBU) Local budget allocations have further risen by a total of
56%. The projected local revenue comes from insignificant local
duties and a percentage of the Value Added Tax (VAT),Corporate
Income Tax and Mineral Resources Tax. The Government of
Turkmenistan estimates that the tax revenues would be sufficient to
finance planned local public expenditure -- with the exception of
Dashoguz Province. An additional 2.2 trillion manats have been
allocated as a subsidy to Dashoguz.
DEFICIT
8. (SBU) The new budget also eliminated the 5.2 trillion-manat
deficit planned earlier for the current year. Funding in the
original 2008 budget comes from surplus budget funds from previous
years, including 6.2 trillion manat in 2006.
9. (SBU) COMMENT: The first half of 2008 saw some positive
developments in the public finance system, including significant
steps to unify the exchange rate and the abolishment of
extra-budgetary funds. However, the latest version of the budget
still has a two-tier budget, a legacy of former president Niyazov's
opaque financial structure. The 2009 State Budget will be the major
challenge and milestone in reforming the budget system of
ASHGABAT 00000802 002 OF 002
Turkmenistan. END COMMENT.
HOAGLAND
SENSITIVE
SIPDIS
STATE FOR SCA/CEN, EEB
E.O. 12958: N/A
TAGS: PREL PGOV EFIN ECON TX
SUBJECT: TURKMENISTAN: EXCHANGE RATE DEPRECIATION ALLOWS
GOVERNMENT TO INCREASE STATE BUDGET
1. (U) Sensitive but unclassified. Not for public Internet.
2. (SBU) SUMMARY: On June 25, Turkmenistan's Parliament passed an
adjusted State Budget for the 2008 financial year. The revision
took place due to the appreciation of the manat against the U.S.
dollar -- the currency of Turkmenistan's reserves. The budget has
increased by 93 trillion manats or almost 79%. However, the budget
structure has not been revised and remains opaque. END SUMMARY.
BUDGET INCREASE
3. (SBU) Turkmenistan's Mejlis (Parliament) on June 25 passed a new
law amending the 2008 State Budget previously approved on December
14, 2007. The adjusted budget has grown about 79%, from 118
trillion manats to 211 trillion manats. Government and social
spending account for 16% of the overall increase, while expenses of
state-owned enterprises represent 63%.
WHY THE INCREASE?
4. (SBU) A series of steps to depreciate the previous "official"
exchange rate of 5,200 manats per dollar to 14,200 manats per dollar
over the first half of the year allowed for additional budgetary
allocations in manats. An additional source of funding has been the
resources previously held in various extra-budgetary funds, which
was the standard practice under former President Niyazov but which
the current president vowed to bring under control. On February 4,
President Berdimuhamedov signed a decree eliminating 13
extra-budgetary funds that used to accumulate large amounts of
domestic currency and foreign exchange. According to the decree,
the funds have been transferred to the state budget and the Foreign
Exchange Reserve Fund (FERF). However, it is not clear what share
of funds went into the budget proper.
SAME TWO-TIER BUDGET STRUCTURE
5. (SBU) Turkmenistan's budget structure remains unchanged. It
consists of Tier 1 (tax revenue),Tier 2 (state-owned companies) and
the Foreign Exchange Reserve Fund (FERF),which is outside the
budget. Tier 1 finances the government, including local government,
law enforcement, education, social welfare, healthcare, culture
ministries and agencies, and the construction of
communal/residential buildings. In the revised 2008 budget, Tier 1
is around 43 trillion manats, or 20% of the total state budget,
while Tier 2 still dominates the budget with around 168 trillion
manats, or around 80% of the overall state budget. Compared with
the original 2008 budget, Tier 1 expenditure grew by 68%, while Tier
2 expenditure will increase by 82%.
LOCAL BUDGETS TO GROW EVEN MORE
6. (SBU) Local budget allocations have further risen by a total of
56%. The projected local revenue comes from insignificant local
duties and a percentage of the Value Added Tax (VAT),Corporate
Income Tax and Mineral Resources Tax. The Government of
Turkmenistan estimates that the tax revenues would be sufficient to
finance planned local public expenditure -- with the exception of
Dashoguz Province. An additional 2.2 trillion manats have been
allocated as a subsidy to Dashoguz.
DEFICIT
8. (SBU) The new budget also eliminated the 5.2 trillion-manat
deficit planned earlier for the current year. Funding in the
original 2008 budget comes from surplus budget funds from previous
years, including 6.2 trillion manat in 2006.
9. (SBU) COMMENT: The first half of 2008 saw some positive
developments in the public finance system, including significant
steps to unify the exchange rate and the abolishment of
extra-budgetary funds. However, the latest version of the budget
still has a two-tier budget, a legacy of former president Niyazov's
opaque financial structure. The 2009 State Budget will be the major
challenge and milestone in reforming the budget system of
ASHGABAT 00000802 002 OF 002
Turkmenistan. END COMMENT.
HOAGLAND